CBRE Middle East, the global leader in commercial real estate, released its latest edition of the Saudi Arabia Real Estate Market Review for the fourth quarter of 2024.
In Riyadh, demand for space in the Office Sector remained strong through year-end 2024, though transactional activity is now clearly being constrained by the lack of space for immediate lease and occupation. The high occupancy rates across the capital’s prime office districts reflect the strong prevailing demand, driven by the Kingdom’s thriving non-oil economy which is a key component of the government’s Vision 2030 diversification strategy. In the 12 months to Q4 2024, occupancies have remained close to capacity and rental rates have also continued to move upwards, with Riyadh experiencing a substantial 18% increase in average rents. Growth in Jeddah and Dammam was less pronounced, at approximately 10% and 12% respectively, highlighting the particularly acute supply challenges in Riyadh. The surging demand and subsequent scarcity of accommodation is also reflected in other broader market trends, including landlords seeking to maximize opportunities in new leases and renewals. Despite the rapidly rising rents, global occupiers and investors remain attracted to the Kingdom, as reflected in the continuation of the RHQ license growth through Q4.
Saudi Arabia’s Residential Market is expected to experience significant growth over the next few years, driven by a strong economic foundation, rapidly growing population, positive demographics, and increasing demand for new homes, particularly in Riyadh, Jeddah, and Dammam. This demand is driving prices and rental rates higher, a trend that is expected to continue, with the value of new residential mortgages in the Kingdom rising 17% year-on-year in 2024. The strong market growth is reflected in rising property values in Riyadh, with average prices increasing by over 6% in the past year. As new, high-quality units enter the market, prices are anticipated to continue to rise in 2025. In Riyadh, the villa market has seen steady growth, with average prices now approaching SAR6,000 per square meter. In Jeddah, apartment values are slightly lower, averaging approximately SAR4,000 per square meter, while villa values are notably higher, reaching nearly SAR5,700 per square meter.
Saudi’s POS data reflected the country’s strong underlying fundamentals and year-on-year growth in the Kingdom’s Retail Market, up around 9% from 2023. The F&B market continues to play a key role in driving overall sales, albeit growth slowed from the previous year, growing by around 7% year-on-year versus 14% in the year to December 2023. Several major shopping centres are expected to be completed in the coming years, which will help to change the landscape of country’s retail market. Whilst market dynamics have been improving, with rising rental rates and occupancy rates in recent quarters, the quantum of new space expected in the medium term may shift the dynamic back in the tenant’s favour.
Looking at the Hospitality Sector, according to Saudi’s Minister of Tourism, the Kingdom recorded close to 30 million bound tourists in 2024, up from 27.4 million in 2023. This has helped the sector contribute close to 5% of the country’s total GDP and put it on track to reach a targeted 10% contribution by the end of 2030. Over the same period, Saudi Arabia is targeting a significant increase in inbound tourism, aiming to attract 70 million visitors and a total of 170 million tourists annually. This ambitious goal is being supported by the country’s strategic investment initiatives, designed to broaden and deepen the visitor profile. The Kingdom is also leveraging its major global sporting events, including the 2034 FIFA World Cup, to further enhance its appeal to international visitors. While the long-term prospects for Saudi’s tourism industry are promising, the recent surge in new hotel supply has led to a slight decline in occupancy rates, down 1.7% year-on-year in December. Average daily rates (ADRs) increased 2.1% during the same period, resulting in a relatively stable revenue per available room (RevPAR) compared to the full year.
Meanwhile, key business and MICE markets such as Riyadh saw more positive movements across all performance metrics, including strong growth in ADRs and RevPAR, and a more marginal increase in average occupancy rates. Similarly, markets like Dammam and Medina, also saw positive dynamics prevail. With room growth expected to accelerate in the coming 12-24 months, hotels are likely to experience heightened competition, particularly in markets like Jeddah and Makkah where a significant volume of new keys are expected to complete.
In Saudi Arabia’s Industrial and logistics Sector, The Saudi Authority for Industrial Cities and Technology Zones (MODON) significantly expanded its commitment to developing the Kingdom’s industrial landscape in Q4 2024, signing substantial private sector partnerships. The initiatives focus on enhancing infrastructure, expanding industrial cities, and constructing ready-made factories to attract investment. Notably, 247 ready-built factories will be constructed across several industrial cities, including a dedicated food cluster in Jeddah, offering businesses streamlined market entry as part of the country’s food security strategy and wider plans for boosting domestic production capability. MODON is also investing heavily in upgrading existing infrastructure, targeting road networks, water systems, electricity services, and safety measures. Amidst strong non-oil growth and rising investments, industrial rents are continuing to move higher. In Riyadh, average rates reached approximately SAR 215 square metre per annum, whilst prime properties in the eastern part of the city currently command the highest rents, while central locations, impacted by congestion, remain more affordable.
Matthew Green, Head of Research MENA, comments: “Saudi’s real estate market continues to benefit from the country’s strong non-oil sector and wider investment environment, driven by the highly successful RHQ initiative which continues to see the set-up of new regional headquarter offices, supporting growth not only in the commercial market but across the wider economy.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
