Saudi Arabia’s office market needs more high-quality space

Demand in Riyadh is flat, with only a handful of properties such as Al-Faisaliah tower, right, retaining high occupancy levels. (Shutterstock)
Updated 05 December 2018
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Saudi Arabia’s office market needs more high-quality space

  • Saudi Arabia’s major cities and business hubs continue to suffer from a lack of the high-quality grade A stock
  • Rents for the lower-end and increasingly dated grade B space have softened, with potential renters put off by issues such as poor accessibility or lack of parking

LONDON: Office space rents remain under pressure in Saudi Arabia this year due to subdued occupier demand and a sluggish economy, according to a new report.
While the Kingdom recorded a pick-up in economic growth in 2018 due to improved oil prices, declines recorded in late 2017 still drag on the office-space rental market, the research published on Tuesday by real estate consultancy Knight Frank found.
Saudi Arabia’s major cities and business hubs continue to suffer from a lack of the high-quality grade A stock most sought-after by private and public companies.
Rents for the lower-end and increasingly dated grade B space have softened, with potential renters put off by issues such as poor accessibility or lack of parking. “The slowdown in the office market continued in 2018, as subdued occupier demand weighs on market-wide rents and occupancy levels; while key prime schemes continue to perform better than the average market as a result of limited stock of high quality assets,” said Raya Majdalani, research manager at Knight Frank.
Demand could recover in the longer term as reforms under the government’s National Transformation Plan and Vision 2030 begin to feed into the economy, the report said.
Economic growth is projected to reach 2.2 percent this year and 2.3 percent in 2019, according to the International Monetary Fund (IMF) estimates.
Urban regeneration initiatives such as mixed-use communities will act as a “catalyst” for the sector, Knight Frank said.
Demand in the capital city of Riyadh remains flat, with only a handful of grade A properties such as Kingdom Tower, Al-Faisaliah tower and Business Gate retaining high occupancy levels, the report found.
The King Abudullah Financial District is set to hand over phase 2 stock after 2021, which is expected to boost supply of quality space.
Average third-quarter Riyadh rents for grade A property stood at SR1,550 per square meter per year, while grade B rents stood at SR775 per square meter.
Renters in Jeddah are also waiting for a fresh supply of high-end office space, with the planned Jeddah Gate project, from the Dubai-based developer company Emaar, set to deliver about 230,000 square meters of high-quality office space in a mixed-use environment.
Knight Frank said that it remained “cautious” about the “timely delivery” of scheduled projects, adding it expects further delays given market conditions.
Grade A rents in the Red Sea city declined by 4 percent year-on-year and Grade B rents fell by 13 percent.


New Zealand to conduct own assessment of Huawei equipment risk

Updated 8 min 26 sec ago
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New Zealand to conduct own assessment of Huawei equipment risk

  • Huawei faces intense scrutiny in the West over its relationship with the Chinese government
  • Several Western countries had restricted Huawei’s access to their markets

WELLINGTON: New Zealand will independently assess the risk of using China’s Huawei Technologies in 5G networks, Prime Minister Jacinda Ardern said on Monday after a report suggested that British precautions could be used by other nations.
Huawei, the world’s biggest producer of telecoms equipment, faces intense scrutiny in the West over its relationship with the Chinese government and US-led allegations that its equipment could be used by Beijing for spying.
No evidence has been produced publicly and the firm has repeatedly denied the allegations, which have led several Western countries to restrict Huawei’s access to their markets.
The Financial Times reported on Sunday that the British government had decided it can mitigate the risks arising from the use of Huawei equipment in 5G networks. It said Britain’s conclusion would “carry great weight” with European leaders and other nations could use similar precautions.
New Zealand’s intelligence agency in November rejected an initial request from telecommunications services provider Spark to use 5G equipment provided by Huawei.
At the time, the Government Communications Security Bureau (GCSB) gave Spark options to mitigate national security concerns over the use of Huawei equipment, Ardern said on Monday.
“The ball is now in their court,” she told a weekly news conference.
Ardern said New Zealand, which is a member of the Five Eyes intelligence sharing network that includes the United Kingdom and the United States, would conduct its own assessment.
“I would expect the GCSB to apply with our legislation and our own security assessments. It is fair to say Five Eyes, of course, share information but we make our own independent decisions,” she said.
Huawei New Zealand did not immediately respond to a request for comment. Spark said it was in discussions with GCSB officials.
“We are working through what possible mitigations we might be able to provide to address the concerns raised by the GCSB and have not yet made any decision on whether or when we should submit a revised proposal to GCSB,” Spark spokesman Andrew Pirie said in an emailed statement.
The Huawei decision, along with the government’s tougher stance on China’s growing influence in the Pacific, has some politicians and foreign policy analysts worried about potential strained ties with a key trading partner.
Ardern’s planned first visit to Beijing has faced scheduling issues, and China last week postponed a major tourism campaign in New Zealand days before its launch.
Ardern said her government’s relationship with China was strong despite some complex issues.
“Visits are not a measure of the health of a relationship they are only one small part of it,” she said, adding that trade and tourism ties remained strong.