It’s the ‘right time’ to move into Saudi Arabia, says CBRE

It’s the ‘right time’ to move into Saudi Arabia, says CBRE
Skyscrapers stand in the King Abdullah financial district in Riyadh. Saudi Arabia is attracting increasing numbers of multinationals. (Getty Images)
Updated 17 April 2018

It’s the ‘right time’ to move into Saudi Arabia, says CBRE

It’s the ‘right time’ to move into Saudi Arabia, says CBRE

Dubai often attracts multinationals looking for a base to serve the wider region. Saudi Arabia, though armed with a much bigger economy and population than the nearby emirate, can be overlooked.
This is about to change, said Nicholas Maclean, managing director for the Middle East at the real estate services firm CBRE. He believes that economic and political reforms spearheaded by Crown Prince Mohammed bin Salman are drawing the attention of international and GCC-based corporates and investors.
“We see a significant increase in the interest in Saudi Arabia. They want to know what is going on. They are interested in the changes — and they are interested in looking at the country for opportunities,” he said.
Over the past year, Saudi Arabia has lifted the 35-year ban on cinemas, announced plans to build up its tourism sector with luxury resorts on islands in the Red Sea, and revealed details of a new $500 billion business and industrial zone development, called Neom, which will have links to Jordan and Egypt.
“The level of enquiry we have to produce reports or give some commentary on Saudi Arabia to the US and Western Europe has gone up tenfold in the last 18 months,” he said, noting that interest spans sectors including retail, pharmaceuticals, defense, and hospitality.
However, a scarcity of appropriate real estate assets to buy will be a challenge for some of those interested investors.
“The nature of the real estate they require doesn’t exist at the moment. So we see corporates through their funding partnerships looking to create facilities that are fresh,” Maclean said.
The potential of the residential housing sector is another area catching the eye of international developers, particularly from the US, which, Maclean said, are looking to partner with Saudi organizations or families.
“Some of the big housing schemes are probably not in the locations where people want to be — so building housing en masse for young Saudis in locations where they want to live and have jobs is an opportunity for big international house builders,” he said.
With more international firms looking to find, manage or invest in property within Saudi Arabia, it has become increasingly relevant for CBRE to have a presence in the Kingdom.
“Now is the right time to go into the country,” Maclean said.
CBRE has signed a partnership agreement with local firm Dar Al-Riyadh and has been busily recruiting staff for the new office. It is set to bring in a team of members between now and August, and plans to host two launch events planned for October.
“We see that as Saudi Arabia appears to open the doors for more internationalization of its business sector, then we need to be there,” said Maclean.
The company currently has an operational presence in the Kingdom, offering services from Saudi Arabia that fall under its “Global Workspace Solutions” business line.
This area of business — which includes facilities management services — is designed for CBRE’s international corporate occupier clients. These companies could be occupying anything from offices to retail outlets or manufacturing spaces.
Maclean envisaged a “full service business” being offered in the Kingdom in the next few years, which will include a consulting division as well as other business lines such as advisory and transaction services and valuation services.
He is upbeat about the expansion, predicting Saudi business will grow “very fast.”
“It will at least match the scale of the businesses across the rest of the region put together within a relatively short period of time of three, four or five years,” he said.
CBRE’s growth ambitions in Saudi Arabia will benefit from what Maclean sees as a greater “willingness” and “change of attitude” among Saudis to work with companies overseas.
Examples of this willingness could be seen last year when foreign investors were allowed to participate in initial public offerings in the Kingdom, as well as to access a parallel stock market for small and medium-sized businesses.
International cinema chains from the UK and US were the first companies to sign deals to launch multiplexes in the country after the lifting of the ban in December.
“Where the challenge is for us is ensuring we bring some of the international expertise we have and make sure we fit culturally, and it is not insulting or patronizing to the local market,” he said.
Saudis themselves will play an important role in the growth of CBRE’s business, Maclean said, explaining that around half the workforce will be Saudi.
“We want to take young Saudis out of the country and put them through an international training program and bring them back,” he said.
While Saudi Arabia is now catching the eye of corporates, the business and trade hub of Dubai has clung on to its appeal to international business.
The low oil prices seen in recent years had posed a threat to the emirate, with some companies — particularly in the oil and gas sector — downsizing their operations and reviewing whether they really needed their expensive high-rise offices.
Maclean said he had seen signs that Dubai is getting much busier again.
“The drive back from Abu Dhabi to Dubai is painful again in the evenings,” he said anecdotally, referring to the increasingly busy main road linking the two emirates. “Getting around Dubai … it feels busier,” he said.
Maclean added that CBRE has enjoyed its “best year ever” in 2017 in Dubai’s commercial property sector, particularly among the Fortune 500 corporate clients.
This was in part due to many larger companies going through a consolidation process, moving to smaller offices, or taking fewer floors or even sharing property with others. CBRE provided advisory and other services that support those moves.
The quality of new available properties has also improved, Maclean said, noting there has been a “flight to quality.”
A CBRE research note released in February said that sustained occupier demand for good-quality office accommodation is likely to stay “relatively firm” for the next few quarters.
However, available office space will continue to outstrip demand as new completed properties come on to the market, the note said. This has placed particular pressure on “secondary quality” office space.
“The primary segment of the marketplace in Dubai and Abu Dhabi is going to perform quite well over the next two or three years, and probably the secondary or tertiary market will perform less well,” Maclean said.
Dubai-based companies, as well as those elsewhere in the UAE, are also paying much closer attention to how the office environment can help retain staff, which opens up opportunities for CBRE.
“We see more creativity in the interior designs,” he said, noting rising demand for more breakout spaces, and other features aimed at making the workplace a more pleasant place to be.
Retail is another area where CBRE sees increasing opportunity to offer its services, and the company recruited a new team focusing on this sector last year.
Dubai’s malls have long been a vital cog in the emirate’s economy, attracting tourists and locals alike to shop, eat, go to the cinema and even ski.
But with the launch of online retailer noon.com in September and Amazon buying souq.com, the sector is facing fresh challenges.
“Finding the balance between bricks and mortar and online is something we have people that specialize in around the world,” said Maclean. Retailers across the UAE are also dealing with the new value-added tax (VAT) which came into force at the beginning of this year.
However, one of the biggest opportunities in the commercial sector could be to open up the UAE’s commercial real estate market to more international investment, Maclean said.
“From an institutional perspective, there is some level of frustration. “There are lots of institutions that want to take a stake in Dubai but don’t. The nature of the market is relatively illiquid because that stock that comes to market, outside of the residential sector, is snapped up by GCC investors,” he said.
These buyers then tend to hold on rather than sell these assets.
“There is a really interesting opportunity for the UAE to capture a greater slice of foreign institutional capital moving around the world,” he said.
On the residential side, Dubai is preparing for a flood of new units to come onto the market which may keep property prices subdued.
Close to about 30,000 new units were added in 2017, according to CBRE figures published in February. The company has forecast that more than 90,000 new apartments and villas could enter the market between 2018 and 2020.
Maclean said there is always a “question mark” over whether the planned properties will be delivered on time, adding that developers may alter the delivery pipeline depending on demand.
Yet, this excess of supply coupled with reduced prices has lured many buyers back to the market.
Sales of off-plan properties increased by about 56 percent in 2017 compared to the previous year, in terms of the number of transactions, while the total value of sales increased 44 percent on the previous year, according to CBRE data.
“What we deduce from that is that gradually declining prices have reached a level which encouraged people to come back to the market,” he said.


Saudi Arabia’s economy likely to grow in 2021 and 2022, says report

Saudi Arabia’s economy likely to grow in 2021 and 2022, says report
Updated 01 August 2021

Saudi Arabia’s economy likely to grow in 2021 and 2022, says report

Saudi Arabia’s economy likely to grow in 2021 and 2022, says report
  • Capital Economics' forecast a further evidence that the Saudi economic recovery has taken off in 2021

RIYADHH Saudi Arabia’s economy is poised to grow from 2.2 percent to 4.8 percent in 2021 and from 4.1 percent to 6.3 percent in 2022, said a Capital Economics report.

The new forecasts are further evidence that the Saudi economic recovery has taken off in 2021.

At the start of the year, the Kingdom’s Ministry of Finance said that it expected 3.2 percent growth this year — reversing the pandemic-driven downturn of 2020. The International Monetary Fund forecast just 2.1 percent growth two months ago.

The Saudi economy is expected to maintain growth in the second half of the year. The expansion is also backed by higher oil output amid an OPEC+ agreement.

The Kingdom’s finance, insurance, real estate, and business sectors are likely to expand by 9 percent annually and their relative share to overall economic activity will grow by 12.7 percent.

Meanwhile, the services sector is also likely to grow about 10 percent annually on average, implying that its relative gross domestic product (GDP) share will climb to almost 40 percent in 2030.

 


Saudi shoppers helping high-end sector rebound to new peaks

Saudi shoppers helping high-end sector rebound to new peaks
Updated 01 August 2021

Saudi shoppers helping high-end sector rebound to new peaks

Saudi shoppers helping high-end sector rebound to new peaks
  • GCC retail giant aiming to double revenues in the Kingdom, become dominant player by 2022

DUBAI: The Gulf Cooperation Council (GCC) luxury retail sector has recovered to pre-pandemic levels, with high-end brands performing particularly well, as shoppers splash the cash they saved by not spending on entertainment or travel during the last year, according to one of the region’s biggest retailers.

Consultancy firm Bains & Company in April reported that the GCC luxury goods market declined 16.6 percent year on year to $7.4 billion in 2020, with Saudi Arabia down 8 percent and the tourist-dependent UAE declining 25 percent.

However, Michael Chalhoub, president of strategy, growth, innovation and investment and vice-president joint ventures at the Chalhoub Group, which has 559 stores across the GCC and manages brands such as Diro, Swarovski, Fendi and Louis Vuitton, told Arab News that the market has bounced back.

“I think the luxury market, and fashion in particular, has recovered in 2021, at levels even higher than in 2019,” he said.

“Local consumers are traveling less. And so, consumption has been repatriated. And we estimate that, in normal time, between one-third to 50 percent of the luxury consumption of GCC nationals happens abroad in London, Paris and Geneva. But now, because of the pandemic, they’ve had to stay, in particular in Saudi Arabia, where the borders were blocked for most of the first half of the year,” he added.

With gyms, restaurants, entertainment venues and travel off limits for a long period, Chalhoub said that shoppers now had more disposable income and were feeling free to spend their savings.

“I would say that average income has gone higher because of a lack of entertainment expenses. What people aren’t spending in restaurants and travel, they are probably spending it on taking care of themselves,” he said.

Michael Chalhoub

However, Chalhoub said that the rebound differed across retail segments. Very high-end luxury brands are performing much better than premium or affordable brands. Jewelry, fragrances and beauty brands are seeing strong growth, but he observed that makeup was still down, mainly due to consumers wearing masks and not leaving the house as often.

“With fashion, I think that we’re up by 5 to 7 percent in the region versus 2019, mainly with luxury fashion and even more so with high-end luxury,” he said, looking at the industry as a whole.

Many retailers have seen triple-digit growth in their online sales during 2020, and the Chalhoub Group accelerated its digitalization strategy in line with the wider industry. “If we were to compare 2021 numbers to 2019, we’re probably talking about 100 percent growth for the industry. And this is incredible. I think the numbers I had were plus 96 percent in the GCC as a whole and even 138 percent just in the UAE,” he said.

However, while online sales might be popular for grocery or food outlets, high-end fashion consumers still like to feel, touch and try on clothing before buying.

For this reason, Chalhoub said that the company expects a higher percentage of returns when it comes to online high-end fashion. “We’re inviting our customer to say try it on and then send it back if you need to,” he said.

With Saudi Arabia less dependent on international tourists for retail sales, the Kingdom largely avoided the slump in sales last year. Chalhoub Group has operated in the Kingdom since 1975, where it has six offices, 215 stores and about 3,600 employees.

It now controls 38 percent of the Saudi market, 48 percent of fashion and 55 percent of beauty, but it is aiming to become the largest player in the sector by the end of next year.

“We’ve made Saudi Arabia a main focus for ourselves; we want to make sure that we cater for the new Saudi customers as much as possible. We have a population there that is young and really enthusiastic about some of the transformation that is happening there,” Chalhoub said.

“We’re investing a lot into Saudi Arabia. The objective that we had set ourselves about six months ago was to double our revenues there in eighteen months. And that means investing more and catering to those customers spending more locally rather than internationally,” he added.

One of the ways the group is aiming to capture more of the Saudi market is by tapping into the Kingdom’s local fashion talent. In early July, the company launched Fashion Lab, a first-of-its-kind initiative in the Kingdom, offering local entrepreneurs the chance to win $15,000 in funding to help establish their fashion brands.

Successful participants will get to take part in a two-week “boot camp,” which will help them navigate through the different elements of developing their brand, including marketing, supply chain management, content creation and media exposure.

Looking forward, the Bain & Company report said: “With about 40 percent of the population aged under 25, Saudi Arabia will likely remain the biggest engine of growth for the regional luxury industry in coming years.”


Saudi Arabia sets new rules for fruit, vegetable imports

Saudi Arabia sets new rules for fruit, vegetable imports
Updated 01 August 2021

Saudi Arabia sets new rules for fruit, vegetable imports

Saudi Arabia sets new rules for fruit, vegetable imports
  • The ministry has launched a new system for vegetables and fruit imports to support local production

RIYADH: Saudi Arabia’s Ministry of Environment, Water, and Agriculture on Saturday called on fruit and vegetable suppliers to complete all formalities to obtain import licenses before the Aug. 9 deadline.

After Aug. 9, no unlicensed supplier will be allowed to import fruit and vegetables. Those interested can visit the following link to apply for a license: https://eservices.mewa.gov.sa/request/111111.

An import license will be valid for three to 10 years depending on the license category, the ministry said.

Saudi authorities have also issued health guidelines for imports like all shipments should be free of pesticide residues or within the limit allowed by the Kingdom’s laws. 

The ministry has launched a new system for vegetables and fruit imports to support local production, enforce quality control and ensure food security in the Kingdom.


Millions of Americans at risk of losing homes as virus cases spike

Millions of Americans at risk of losing homes as virus cases spike
Updated 31 July 2021

Millions of Americans at risk of losing homes as virus cases spike

Millions of Americans at risk of losing homes as virus cases spike
  • The wave of evictions would come as the fast-spreading delta variant has taken hold in the country and rental housing is in high demand in the hot real estate market

WASHINGTON: Millions of Americans could find themselves homeless starting Sunday when a nationwide ban on evictions expires, even as billions in government funds meant to help them go untapped.

The wave of evictions would come as the fast-spreading delta variant has taken hold in the country and rental housing is in high demand in the hot real estate market.

US President Joe Biden on Thursday urged Congress to extend the 11-month-old eviction moratorium, after a recent Supreme Court ruling meant the White House could not extend the measure through September as intended.

Democratic leaders in Congress were pushing for an extension, but it was unclear if they had the votes, even among moderates in their own party, to prevent the ban from expiring.

Efforts stalled on Friday in the House after a move to pass the extension was unsuccessful, with House Speaker Nancy Pelosi saying in a statement, that “not a single Republican would support this measure.”

The day before, she had called the extension “a moral imperative.”

She also called on governors and local officials “to take whatever steps are necessary to distribute the rental assistance that Congress already allocated.”

Unlike other pandemic-related aid that was distributed from Washington, such as stimulus checks, it was states, counties and cities that were responsible for building programs from the ground up to dole out assistance earmarked for renters.

The Treasury Department said that as of June, only $3 billion in aid had reached households out of the $25 billion sent to states and localities in early February, less than three weeks after Biden took office.

The Centers for Disease Control and Prevention (CDC) ordered the eviction moratorium in September 2020, as the world’s largest economy lost over 20 million jobs amid the pandemic shutdowns. The CDC feared increasing homelessness would boost coronavirus infections.

Although more than half of those lost jobs were recovered as businesses were able to reopen, many families still have not caught up on missed rent payments.

The Census Bureau’s latest Household Pulse survey through the first week of July showed that of 51 million renters surveyed, 7.4 million were behind on their rent and nearly half of those said they were at risk of being evicted in the next two months.


Gulf stocks buoyed by oil prices as emerging markets hammered on China

Gulf stocks buoyed by oil prices as emerging markets hammered on China
Updated 31 July 2021

Gulf stocks buoyed by oil prices as emerging markets hammered on China

Gulf stocks buoyed by oil prices as emerging markets hammered on China
  • Tadawul All Share Index rose 7.5 percent in July
  • MSCI Emerging Market Index dropped 7 percent in the month

RIYADH: Gulf stocks were a relative oasis for emerging market investors this week as the broader complex posted its worst month since March 2020 amid concern over the breadth of a Chinese regulatory crackdown.

The Tadawul All Share Index climbed 0.7 percent on July 29 to end the week 1.9 percent higher for a 7.5 percent monthly gain. The Abu Dhabi Securities Market General Index climbed 1 percent on Thursday, taking it to a record high on the back of a 2 percent advance for First Abu Dhabi Bank.

By contrast, the MSCI Emerging Market Index dropped 1.4 percent on Friday, for a 7 percent monthly loss, the most since the fallout from the pandemic hit global markets early last year. Stocks in mainland China and Hong Kong fell to their lowest this year, on investor worries over government regulations dented the education, property and tech sectors.

Brent crude climbed 2.5 percent in the week after a rollercoaster month that saw it swoon from a two-year high of $77.16 on July 5 to $68.62 on July 19 before recovering to end the month at $76.33.

Concerns over the effect a resurgence in coronavirus cases might have on demand for crude were allayed on Wednesday when a report showed a bigger-than-expected drawdown of crude stockpiles the previous week.

“The reduced stockpile has propped crude prices up which gave a boost to the region’s stock markets,” Daniel Takieddine, senior market analyst at FXPrimus, told Reuters.

The Tadawul’s IPO pipeline will advance this month after Saudi burger chain Burgerizzr said it will begin offering shares to the public on Aug. 15 with the intention to list on the parallel stock market Nomu in September.

The company plans to offer 725,000 shares, representing 29 percent of its SR25 million capital, it said in its prospectus on Thursday.

Further signs of the Kingdom’s ambitious investment program were revealed this week as
The Ministry of Communications and Information Technology announced a $15 billion technology fund to advance digital infrastructure in the Kingdom during the Saudi 4th Industrial Revolution conference held in Riyadh this week.

The public-private partnership will develop advanced technology from the Fourth Industrial Revolution (4IR), which is expected to generate around $1 trillion for the Saudi economy in new revenue streams, a senior Saudi official said on Wednesday.

The Kingdom will enjoy economic boosts from robotics, artificial intelligence, and wireless production models as it pushes for more smarter cities and infrastructure.