JEDDAH: The slowdown in the Kingdom’s real estate sector as a result of the coronavirus pandemic will see a backlog of supply coming on to the market this year, while landlords will also see demand for co-working spaces as employees continue to adopt a hybrid working arrangement.
According to a report from real estate consultancy service JLL, only 150,000 square meters of gross leasable area was completed within the office market in 2020, representing a 67 percent decline from the average seen over the last three years.
Riyadh’s office market is forecast to see the handover of almost 430,000 square meters of office space this year, with the majority being Grade A quality units. Going on past evidence, JLL said this amount was unlikely to transpire, with landlords reevaluating market conditions and delaying projects or putting them on hold.
“However, in the medium-to-long term, with employment figures expected to bounce back, corporates are likely to reemphasize the value-add of office spaces. We expect this will have a positive impact on quality offices spaces,” the report predicted.
JLL forecasts that corporates will remain more dependent on hybrid working models amid the pandemic, meaning a continued combination of remote and office working for most employees.
The consultancy firm said that landlords may look to repurpose existing space and that conversion work may be necessary, with traditional offices being retrofitted into co-working spaces, especially in places close to large residential areas.
However, the JLL report was compiled before last week’s announcement that Riyadh aimed to more than double its population and become one of the 10 richest cities in the world, under ambitious plans unveiled by Crown Prince Mohammed bin Salman at the Future Investment Initiative (FII) conference held in the capital.
“We are therefore aiming to make Riyadh one of the 10 largest city economies in the world,” the crown prince said. “Today it stands at number 40, the 40th largest city economy worldwide. We also aim to increase its residents from 7.5 million today to around 15-20 million in 2030.”
Arab News also reported that 24 multinational companies had decided to establish regional headquarters in Riyadh as part of this plan.
The companies include heavyweights such as PepsiCo, Schlumberger, Bechtel and Boston Scientific.
Fahd Al-Rasheed, president of the Royal Commission for Riyadh City, said that some $220 billion had already been spent or earmarked as government investment for projects in and around Riyadh, but that most of the rest of the required investment would come from the private sector.