CBRE reports that Riyadh’s real estate market reported impressive growth in 2019 across residential, hospitality and retail sectors
Real estate consultancy firm CBRE has released new data that Riyadh’s real estate market including residential, office, hospitality, and retail have reported impressive growth in 2019.
Riyadh’s residential sector has witnessed significant activity levels in 2019, according to the CBRE report, which also revealed that the volume and value of transactions has increased in the Kingdom’s capital by 53 per cent and 63 per cent, respectively, year-on-year.
The report stated that Saudi’s residential sector has been further bolstered by continued government support, such as various initiatives launched by the Ministry of Housing in 2019 to support residential renovations by providing financial or residential units aged 15 plus years. CBRE’s material also revealed that beneficiaries of the Saudi Ministry of Housing’s ‘Sakani’ initiative aimed at increasing the national rate of home ownership has increased by 14 per cent in 2019, compared to 2018.
As of the end of 2019, the capital’s residential supply stood at 1,290,000 residential units with an expected delivery of 111,000 additional units by 2023.
Simon Townsend, head of Strategic Advisory at CBRE MENAT and GM, CBRE KSA, said: “The recent economic and social initiatives and legislation introduced by the Saudi Government have already had an extremely positive impact on the country’s real estate sector.”
“We are already starting to witness impressive growth across major real estate segments including residential, hospitality and retail, and this upwards trajectory is likely to continue in the short to medium term. Increased government spending on large-scale infrastructure and mega-projects is expected to further stimulate the overall market, with a positive trickling down effect on other complementary sectors.”
Meanwhile, co-working and flexible office working structures are expected to reshape Riyadh’s office leasing market, according to CBRE. It stated that the commercial real estate sector is also due to be further stimulated by increased investment and business activity, as evidenced in the announcement of a number of projects, with total investment of more than $15 billion, during the third edition of the Future Investment Initiative in 2019.
Moreover, the Kingdom’s unemployment rate declined in Q3 of 2019 to 12 per cent – down from 12.8 per cent in the same period in 2018. These unemployment rates are expected to continue to decline in the short-term, with a positive impact expected in terms of increased potential office demand.
CBRE’s report is positive about hotel occupancy rates in 2019 and stated that it had increased significantly in 2019 and is expected to grow further in 2020, supported by growing tourism and fuelled by key events, such as the G20 Summit and major sporting and entertainment events.
The Kingdom’s hospitality sector, which has witnessed significant change bolstered by the expansion in the entertainment sector, is expected to experience a further boost from the opening of Qiddiya, which is scheduled for 2023, according to the report.
Townsend added that oversupply remains a challenge; but, the innovative spirit employed by the Government and private entities alike demonstrates the encouraging direction that the real estate market is moving in and the promising opportunities that are continuing to arise.
Additionally, CBRE’s data is optimistic about the retail sector which is expected to drive growth and innovation in Riyadh through entertainment and F&B sectors. There is expected to be an increased focus on ‘Shoppertainment’, with around ten cinemas opening in the capital since 2018 and wider plans to open more than 350 cinemas across the country by 2030, it stated.
In 2019, Al Akaria announced the establishment of a joint venture with Triple Five to develop the world’s largest mixed-use entertainment and shopping complex at Al Akaria’s Widyan complex in Riyadh. Moreover, as of January 1, 2020, retail shops may opt to remain open 24/7, which is expected to have a positive effect on the sector going forward.
Townsend noted that significant infrastructure projects are nearing completion, such as the Riyadh Metro, which will add to the positive sentiment both from an occupier and investor perspective. “Overall, the country is making great leaps in its efforts to become a global business hub and world-class tourism destination, and the market is expected to continue to react positively to the efforts of the public and private sectors alike,” he concluded.