SAUDI ARABIA OFFICE REAL ESTATE MARKET - GROWTH, TRENDS, COVID-19 IMPACT, AND FORECASTS (2023-2028)

The Saudi Arabia Office Real Estate Market is segmented By Sector (Information Technology (IT and ITES), Manufacturing, BFSI (Banking, Financial Services, and Insurance), Consulting, and Other Services) and By Key Cities (Riyadh, Jeddah, and Makkah). The report offers market size and forecast in value (USD billion) for all the above segments.

Saudi Arabia Office Real Estate Industry Overview

Saudi Arabia Office Real Estate Market - CAGR
Study Period: 2019-2028
CAGR: > 9 %

Major Players

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*Disclaimer: Major Players sorted in no particular order

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Saudi Arabia Office Real Estate Market Analysis

  • The Saudi Arabia Office Real Estate Market is anticipated to register a CAGR of more than 9% over the forecast period. The market is driven by the government initiatives like VISION 2030, and allied programs attracting investors to enter the market. Furthermore, commercial and retail space demand especially for Grade-A offices is increasing post-pandemic driving the market.
  • According to the head of global real estate services firm Jones Lang LaSalle, Saudi Arabia's retail sector saw an increase in retail space and a strong recovery in domestic demand following the relaxation of pandemic restrictions in the first half of 2022. Firms that planned to open new offices are making a comeback. As a result, demand for office real estate is increasing, as evidenced by rising occupancy rates in Grade A buildings. At the moment, office rates are extremely high and the rents are also witnessing significant growth. Demand for retail shops is also increasing and malls, in particular, are reporting high levels of footfall.
  • Saudi Arabia's GDP is expected to have increased by 8.6% in the third quarter of 2022. The term "electronic commerce" refers to the sale of electronic goods. Despite a lack of availability, the Saudi office market remains centred on Riyadh. There was an increase in the occupier requirements in Jeddah and to a lesser degree in Dammam and Khobar. In the 12 months to September 2022, Riyadh's Grade A office rents increased by 5.9%, while Grade B rents increased by 3.5%. Dammam and Khobar in the Eastern Province both saw increases in Grade A offices of 3.9% and 8.2%, respectively. The office market in Jeddah increased by 8.2% year on year in the third quarter of 2022, while Grade B remained stable.
  • Riyadh, Saudi Arabia's capital and commercial hub, is well-positioned to benefit from the region's overall commercial activities. In contrast to previous performance, the Riyadh office market saw a solid increase in rental prices for both Grade A and B sectors in the first half of 2022. International companies with operations in Saudi Arabia are also expected to relocate their headquarters there by 2024. This is in line with the Regional Headquarters Program. This is expected to contribute to a continued upward trend in Riyadh's office market, particularly in the Grade A segment, in the medium term. As a result, it can be anticipated that there will be increased demand for office space.
  • Saudi Arabia's office sector saw an increase in performance over the last year, fueled by a variety of government mandates that drew a significant number of international firms to the country. A large proportion of this demand was accounted for by the government and related entities, striving to achieve the goals outlined in the Vision 2030 strategy. With the government showing no signs of slowing down its efforts to meet the lofty goals outlined in Vision 2030, investors can expect a steady and rising demand for commercial real estate in the Kingdom's major cities over the next year. This demand is expected to be strongest in the increasingly commercialised cities of Riyadh and Jeddah, where rental yields are among the highest in the country.

Saudi Arabia Office Real Estate Industry Segments

Office buildings are divided into two types: urban and suburban. Skyscrapers and high-rise properties are examples of urban office buildings. Many office buildings are built-to-suit and can be multi-tenanted or single-tenanted. They are also divided into three categories: Class A, Class B, and Class C. A complete background analysis of the Saudi Arabia Office Real Estate Market, including the assessment of the economy and contribution of sectors in the economy, market overview, market size estimation for key segments, emerging trends in the market segments, market dynamics, and geographical trends, and COVID-19 impact, is covered in the report.

The Saudi Arabia Office Real Estate Market is Segmented By Sector (Information Technology (IT and ITES), Manufacturing, BFSI (Banking, Financial Services, and Insurance), Consulting, and Other Services) and By Key Cities (Riyadh, Jeddah, and Makkah). The report offers market size and forecasts in value (USD billion) for all the above segments.

By Sector
Information Technology (IT and ITES)
Manufacturing
BFSI (Banking, Financial Services, and Insurance)
Consulting
Other Services
By Key Cities
Riyadh
Jeddah
Makkah

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Saudi Arabia Office Real Estate Market Trends

This section covers the major market trends shaping the Saudi Arabia Office Real Estate Market according to our research experts:

Increasing Demand for Office Spaces in Key Commercial Cities

Despite a lack of availability, the Saudi office market remains centered on Riyadh. Increased demand for occupiers in Jeddah, and to a lesser extent in Dammam and Khobar. In the 12 months to September 2022, Riyadh's Grade A office rents increased by 5.9%, while Grade B rents increased by 3.5%. As a result, demand for office real estate is increasing, as evidenced by rising occupancy rates in Grade A buildings. The Saudi real estate industry's momentum toward decarbonization and transparency has propelled the country to the top 50 most transparent real estate markets in the world.

In both Riyadh and Jeddah, demand is robust for offices that have a wider provision of facilities (such as F&B outlets within buildings) and projects with flexible floorplates to cater to a range of tenant requirements. In the first half of this year, DMA activity levels remained relatively low, with no significant changes in rents or vacancy rates recorded. Office rental values in Makkah fell by about 3% year on year. In the short term, we expect occupiers in both office markets to maintain a strong negotiating position.

Saudi Arabia Office Real Estate Market trend - increasing demand

Increase in Retail Sector backed by Government Initiatives

As the largest market in the GCC and characterized by a strong consumer base with high disposable income, Saudi Arabia's retail market has managed to bounce back from the effects of the pandemic. The retail market has shown signs of stability in the first half of 2022, following a subdued performance in 2020-21 due to the pandemic. However, it will take some time to get back on track, owing to increased market competition, which is putting downward pressure on rental rates. Combining retail with other complementary real estate components such as entertainment, hotel, office, or residential could be a good idea for increasing foot traffic. As Riyadh establishes itself as a premier tourist destination, an influx of inbound and domestic tourists can be expected.

Saudi Arabia's real estate market could boom in the next ten years, attracting investors attracted to the Kingdom by the government's multibillion-dollar economic projects like NEOM. The country is attempting to reinvent its economy with its Vision2030 plan, which aims to diversify the country's income away from oil revenues by investing in industries such as esports and video gaming, as well as the development of the futuristic city NEOM. As a result, the value of the country's real estate market may rise, and property investors may flock to the country.

With USD 1 trillion slated for real estate and infrastructure project development, the Kingdom of Saudi Arabia (KSA) will see sustained property market growth, fueled by Vision 2030 and the Iskan program. At least eight new cities are planned, primarily along the Red Sea coast. Many projects are also planned for existing major cities. Riyadh's population is expected to exceed 15 million by 2030, with the ambitious goal of becoming one of the world's ten largest cities. The retail property market in Saudi Arabia has a lot of long-term growth potential. Real estate will gain from various new programmes to provide local housing and invigorate the business and financial sectors via investments in commercial real estate.

It's also worth noting that landlords have been implementing various strategies to attract and retain tenants, such as incorporating F&B and entertainment facilities into their retail centres to increase footfall. Currently, developments with such positioning outperform the market in terms of occupancy and footfall.

Saudi Arabia Office Real Estate Market trend - retail growth

Saudi Arabia Office Real Estate Market Competitor Analysis

The Saudi Arabia Office Real Estate Market is fragmented with the presence of a large number of local and regional players, as well as few global players. The major players include Al Saedan Real Estate, SEDCO Development, Kingdom Holding Company, Jabal Omar Development Company, Makkah Construction & Development Co., and many others. The major share of the market comprises of local and regional players. While, the companies are trying to construct more grade-A offices as the demand is soaring due to investment by global players entering the country and establishing their offices. 

Saudi Arabia Office Real Estate Market Top Players

  1. Al Saedan Real Estate

  2. SEDCO Development

  3. Kingdom Holding Company

  4. Jabal Omar Development Company

  5. Makkah Construction & Development Co.

*Disclaimer: Major Players sorted in no particular order

Saudi Arabia Office Real Estate Market - Competitive Landscape

Saudi Arabia Office Real Estate Market Recent Developments

  • November 2022: Arabian Centres Company, Saudi Arabia's largest mall operator, has agreed to sell non-core assets worth 2 billion Saudi riyals to Adeer Real Estate. A study determined that the assets were best suited for residential or office space development rather than supporting the mall operator's strategic priorities of developing lifestyle destinations.
  • October 2022: Ajdan Real Estate Development Company announced that it has signed a contract with Al-Muhaidib Group to develop, market, and operate the 250 million Saudi riyals (USD 66.5 million) Bayfront commercial project on the east coast of Al-Khobar. The Bayfront will be located on the northern part of Al-Khobar's beach, spanning over 100,000 square metres (sqm) from the shore and a 1,600 sqm island.

Saudi Arabia Office Real Estate Market Report - Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

    1. 2.1 Analysis Methodology

    2. 2.2 Research Phases

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET INSIGHTS AND DYNAMICS

    1. 4.1 Current Market Scenario

    2. 4.2 Market Overview

    3. 4.3 Market Dynamics

      1. 4.3.1 Drivers

      2. 4.3.2 Restraints

      3. 4.3.3 Opportunities

    4. 4.4 Value Chain / Supply Chain Analysis

    5. 4.5 Porters Five Forces Analysis

      1. 4.5.1 Threat of New Entrants

      2. 4.5.2 Bargaining Power of Buyers/Consumers

      3. 4.5.3 Bargaining Power of Suppliers

      4. 4.5.4 Threat of Substitute Products

      5. 4.5.5 Intensity of Competitive Rivalry

    6. 4.6 Current Market Overview

    7. 4.7 Commercial Real Estate Buying Trends - Socio-economic and Demographic Insights

    8. 4.8 Government Initiatives and Regulatory Aspects for Commercial Real Estate Sector

    9. 4.9 Insights into Existing and Upcoming Projects

    10. 4.10 Insights into Interest Rate Regime for General Economy and Real Estate Lending

    11. 4.11 Insights into Rental Yields in the Commercial Real Estate Segment

    12. 4.12 Insights into Capital Market Penetration and REIT Presence in Commercial Real Estate

    13. 4.13 Insights into Public-private Partnerships in Commercial Real Estate

    14. 4.14 Insights into Real Estate Tech and Startups Active in the Real Estate Segment (Broking, Social Media, Facility Management, and Property Management)

    15. 4.15 Impact of the COVID-19 on the Market

  5. 5. MARKET SEGMENTATION

    1. 5.1 By Sector

      1. 5.1.1 Information Technology (IT and ITES)

      2. 5.1.2 Manufacturing

      3. 5.1.3 BFSI (Banking, Financial Services, and Insurance)

      4. 5.1.4 Consulting

      5. 5.1.5 Other Services

    2. 5.2 By Key Cities

      1. 5.2.1 Riyadh

      2. 5.2.2 Jeddah

      3. 5.2.3 Makkah

  6. 6. COMPETITIVE LANDSCAPE

    1. 6.1 Overview

    2. 6.2 Company Profiles

      1. 6.2.1 Al Saedan Real Estate

      2. 6.2.2 SEDCO Development

      3. 6.2.3 Kingdom Holding Company

      4. 6.2.4 Jabal Omar Development Company

      5. 6.2.5 Makkah Construction & Development Co.

      6. 6.2.6 Abdul Latif Jameel

      7. 6.2.7 Dar Ar Alkan

      8. 6.2.8 JLL Riyadh

      9. 6.2.9 Century 21 Saudi Arabia

      10. 6.2.10 Saudi Real Estate Company

      11. 6.2.11 Nai Saudi Arabia

      12. 6.2.12 360 Realtors LLP Riyadh*

    3. *List Not Exhaustive
  7. 7. FUTURE OF THE MARKET

  8. 8. APPENDIX

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Saudi Arabia Office Real Estate Market Research FAQs

The Saudi Arabia Office Real Estate Market market is studied from 2019 - 2028.

The Saudi Arabia Office Real Estate Market is growing at a CAGR of >9% over the next 5 years.

Al Saedan Real Estate, SEDCO Development, Kingdom Holding Company, Jabal Omar Development Company, Makkah Construction & Development Co. are the major companies operating in Saudi Arabia Office Real Estate Market.

Saudi Arabia Office Real Estate Industry Reports

In-depth industry statistics and market share insights of the Saudi Arabia Office Real Estate sector for 2020, 2021, and 2022. The Saudi Arabia Office Real Estate research report provides a comprehensive outlook of the market size and an industry growth forecast for 2023 to (2023to2028. Available to download is a free sample file of the Saudi Arabia Office Real Estate report PDF.

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