Khalid Al-Harbi, chief executive officer of Aqari Investment Holding, said since supply is exceeding demand, his company as well as other real estate firms have been forced to reduce rent by almost 30 percent.
Aqari manages a number of commercial and residential buildings as well as malls in Jeddah, Makkah and other Saudi cities.
Currently it is marketing the Azwaad Center on Sultan Road, a major business center situated around Jeddah's upmarket neighborhood.
Al-Harbi said two years ago he used to charge SR1,500 per square meter for a ground floor showroom on Sultan Road. But now he is facing difficulties in renting out Azwaad Center for even SR1,000 per square meter.
Similarly, office space on upper floors was sold for SR600-650 per square meter. Now it is being offered at SR450.
He blamed the declining prices more on excess supply than anything else. It has nothing to do with the ongoing financial crisis, he said, adding Jeddah was least affected.
The outlook was much better for residential buildings, however.
"Bring any number of villas or apartments and we will sell it at a premium, as there is a tremendous shortage of housing units in Jeddah, Makkah, Riyadh and Dammam," said Al-Harbi.
He claimed investors in Jeddah are more interested in villas and residential buildings than commercial complexes.
A strategic plan released by the Jeddah municipality earlier this month supports Al-Harbi's claims.
It said there is currently a shortage of 283,000 housing units, including 80,000 for the low-income group.
It called for an additional 151,600 units for accommodating people in underdeveloped areas and 51,500 units to meet population growth demands. The municipality estimated the demand over the next 20 years at nearly one million housing units.
Al-Harbi said Jeddah needs at least 600 villas and 1,000 apartments each year to meet growing demand. Dammam also needs a similar number of villas and apartments, he added.
He cited a newly developed neighborhood near the Briman Bridge off Al-Haramain (Makkah-Madinah) Expressway, where 600 buildings with 12 to 20 apartments each have been built over the last five years.
"Every apartment in this area has been sold. Now there is a heavy demand for new buildings which are coming up in the project’s second phase," he said.
According to Al-Harbi, apartments are more in demand than villas as Jeddah's population consists largely of young people of marriageable age.
"Since newly wed couples can't afford villas which are expensive, they go for apartments which cost them around SR400,000 to SR500,000 for a four-bed unit," he said.
