Performance across Saudi Arabia’s various real estate market asset classes remains mixed. However, the residential market continues to outperform, according to the latest quarterly Saudi Arabia Real Estate Market Review by global property consultants, Knight Frank.
Knight Frank notes that the number of residential transactions in Riyadh are up 77%, year on year and a similar story is playing out on the Red Sea coastal city of Jeddah, where the number of homes sold is up 44% on this time last year.
In the office market, with the exception of Riyadh, rental rates continue to ebb as demand remains muted. Knight Frank expects total office stock in Riyadh and Jeddah to reach 5.3m sqm and 1.8m sqm by the end of 2023.
The retail sector has been one of the most significant casualties of the pandemic, with headline lease rates in prime shopping malls across the country falling by between 1% and 5% over the last 18 months, according to Knight Frank. In fact, during Q2 alone, rents in the Kingdom’s best shopping malls declined by between 1.5-3% in Riyadh, Jeddah and DMA.
According to the Saudi Central Bank (SAMA), consumer spending in Saudi Arabia increased by 2.1%, to around SAR 261 billion in Q1 2021, compared to SAR 256 billion over the same period last year. The food & beverages sector has enjoyed the most significant boost, with spending surging by 35% to SAR 17.4 billion, while spending in restaurants and cafes rose by 58.5% over the same period. This relative outperformance is linked in part to the slight easing of lockdown restrictions, which boosted footfall across the Kingdom’s food and beverage outlets.
The total quality hotel supply in Jeddah stood at 13,230 rooms as at the end of May 2021. Taking into consideration only projects that have broken ground, Knight Frank expects the city’s room supply to increase by 64% by the end of 2023, to 20,600 rooms, higher than Riyadh and DMA combined.
Lastly, domestic tourism spending on hotels, restaurants and leisure rose by a third last year, according to the Saudi Tourism Authority.