Saudi Arabia Office Real Estate Market Size

Saudi Arabia Office Real Estate Market Analysis

The size of Saudi Arabia's Office Real Estate market is USD 7.23 billion in the current year and is anticipated to register a CAGR of over 8.12% during 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.
• 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.