The report covers the office, residential, retail and
hospitality market segments of Riyadh. Jones Lang LaSalle is a preeminent name
in the global real estate industry with 180 offices worldwide and has worked in
over 20 countries in the Middle East and North Africa (MENA) region on projects
worth $200 billion and on transactions in excess of $1.2 billion.
The residential sector is still in a strong upswing of the
market cycle, with the 2010 national census revealing that population growth
has been greater than expected.
This, combined with higher immigration into the capital for
employment and education, is driving demand and creating opportunities across
various market segments. The availability of affordable housing remains an
issue and is being exacerbated by demographic shifts and the increased number
of low income expatriates.
John Harris, co-head of Jones Lang LaSalle said, “Saudi
(Arabia) is witnessing strong economic growth on the back of government investment
and stronger than expected population growth. In Riyadh in particular, we have
seen major investment in the King Abdullah Financial District and the Princess
Noura bint Abdulrahaman University. These major developments have been leading
a general northward shift of activity in the city. The outlook is very positive
with major government and private projects well underway across the
residential, office, retail and hotel markets.”
The office market will see approximately 200,000 sq m of new
office space completed in 2010. However, a large proportion of this does not
meet typical corporate requirements for safety and parking. As the CBD and
central areas fill with developments, access to parking is becoming an
increasing problem for a population that relies on cars. Demand, however, is
keeping pace with supply and vacancy levels remain at around 10 percent.
Average office rents have declined during the year with older buildings and
those outside the CBD seeing the largest falls.
Riyadh’s current stock of retail space is estimated by Jones
Lang LaSalle to be around 2.7 million square meters, and this is expected to
rise to over 3 million by 2014. Strong growth in consumer spending has meant
that demand for space from retailers remains strong. However, the expected
growth in large new retail centers will take some time for the market to
absorb. Rent in prime locations is expected to continue to rise against falls
in less sought after and peripheral areas of the city.
With the exception of the new wing of the Al-Faisaliah
Hotel, the hotel market saw no additions in 2010. The next two years, however,
will see significant growth, primarily through the addition of new hotels from
regional and international branded hotels.
Demand for hotels rooms is predominantly driven by
government bodies and business travelers. The decline in average occupancy
rates in 2009 has continued into 2010, with the exception of five star
properties that have consistently outperformed the market.
Jones Lang LaSalle predicts a relatively stable hospitality
market in the coming year with a slight risk of over-supply in the medium term
as new properties come on stream.
