Riyadh’s residential sector has witnessed significant activity levels in 2019 according to new data released by global real estate consultancy firm CBRE. The report reveals that the volume and value of transactions has increased in the Saudi capital by 53% and 63% respectively year-on-year. Meanwhile residential mortgages for individuals in the Kingdom recorded a growth rate of more than 250% in terms of the number of contracts signed from January 2019 - November 2019. Figures also demonstrate that the value of contracts rose by more than 160% in the same period year-on-year.
The Kingdom’s residential sector has been further bolstered by continued Government support. In October 2019, the Ministry of Housing launched an initiative to support residential renovations by providing financing for residential units aged 15+ years. This will likely result in higher activity among existing aging stock within the central districts of Riyadh. CBRE’s study also reveals that beneficiaries of the Saudi Ministry of Housing’s ‘Sakani’ initiative aimed at increasing the national rate of home ownership has increased by 14% in 2019, compared to 2018. As of the end of 2019, the capital’s residential supply stood at 1,290,000 residential units with an expected delivery of 111,000 additional units by 2023.
Co-working and flexible office working structures, have continued to distrupt the global office markets, and are expected to reshape Riyadh’s office leasing market, according to CBRE. The Kingdom’s unemployment rate declined in Q3 of 2019 to 12% - down from 12.8% in the same period in 2018. These unemployment rates are expected to continue to decline in the short-term, with a positive impact expected in terms of increased potential office demand. Construction on the Riyadh metro continued to progress in 2019, with operations expected to commence in 2020. Upon completion, real estate in proximity to key transport hubs will benefit from enhanced accessibility and connectivity. King Abdullah Financial District is also expected to play a pivotal role in upgrading the capital’s office market. The iconic project will provide a number of Grade A office towers aimed at cementing the district as a local, regional and global financial hub. The commercial real estate sector is also due to be further stimulated by increased investment and business activity, as evidenced in the announcement of a number of projects, with total investment of more than USD 15 billion (SAR 56.2 billion), during the third edition of the Future Investment Initiative in 2019. Total office stock in Saudi Arabia’s capital stood at 4.3 million sqm of gross leasable area (GLA) in the last quarter of 2019 with an additional 1.66 million sqm GLA expected to be delivered by 2023.
Hotel occupancy has increased significantly in 2019 and is expected to grow further in 2020, supported by growing tourism and fueled by key events, such as the G20 Summit and major sporting and entertainment events. The sector was boosted in the last quarter of 2019 due to Riyadh Season, which witnessed over 11.4 million tourists. Furthermore, passengers arriving at King Khalid International Airport exceeded 1.1 million during the first month of Riyadh Season from 11th October – 11th November 2019. On December 1st 2019, the Kingdom assumed the presidency of the 2020 G20. This event marks the first time that the Kingdom will host the G20 summit. More than 100 meetings will be held through the 30th of November 2020, in addition to the Leaders’ Summit which will commence on 21st November 2020. CBRE reports that the Kingdom’s hospitality sector, which has witnessed significant change bolstered by the expansion in the entertainment sector, is expected to experience a further boost from the opening of Qiddiya, which is scheduled for 2023. According to CBRE’s Market Snapshot, supply stood at 17,700 keys in Riyadh in 2019 with 4,500 keys expected to enter the market by 2023. Meanwhile occupancy has risen by 5% year-on-year.
The entertainment and F&B sectors will also continue to drive growth and innovation in Riyadh’s retail sector, CBRE’s report reveals. There is expected to be an increased focus on ‘Shoppertainment’, with around ten cinemas opening in the capital since 2018 and wider plans to open more than 350 cinemas across the country by 2030. In 2019, Al-Akaria announced the establishment of a joint venture with Triple Five to develop the world’s largest mixed-use entertainment and shopping complex at Al Akaria’s Widyan complex in Riyadh. Riyadh’s point of sale transactions increased 73% in volume and 29% in value in November 2019 compared to November 2018, demonstrating the growing retail activity in the Kingdom. On January 1st, 2020, it was announced that retail shops may opt for remaining open 24 hours a day and seven days a week, which is expected to have a positive effect on the sector going forward. According to CBRE’s Market Snapshot, supply stood at 2.91 million sqm of GLA in 2019, with 609,000 sqm GLA expected to be delivered by 2023.
Simon Townsend, Head of Strategic Advisory at CBRE MENAT and General Manager, CBRE KSA, said: “The recent economic and social initiatives and legislation introduced by the Saudi Government have already had an extremely positive impact on the country’s real estate sector. We are already starting to witness impressive growth across major real estate segments including residential, hospitality and retail, and this upwards trajectory is likely to continue in the short to medium term. Increased government spending on large-scale infrastructure and mega-projects is expected to further stimulate the overall market, with a positive trickling down effect on other complementary sectors. Performance remains soft, and oversupply remains a challenge; however, the innovative spirit employed by the Government and private entities alike demonstrates the encouraging direction that the real estate market is moving in and the promising opportunities that are continuing to arise. Furthermore, significant infrastructure projects are nearing completion, such as the Riyadh Metro, which will add to the positive sentiment both from an occupier and investor perspective. Overall, the country is making great leaps in its efforts to become a global business hub and world-class tourism destination, and the market is expected to continue to react positively to the efforts of the public and private sectors alike.”