RIYADH: A home ownership drive spurred growth of the Saudi residential sector in the first quarter of 2022, research by property consultancy company JLL MENA showed.
According to the firm’s “The KSA Real Estate Market” report, the first quarter of this year saw the completion of around 4,000 and 2,000 units in Riyadh and Jeddah, respectively, with the majority in the capital delivered through the Ministry of Housing’s projects located in the eastern part of the city.
Nearly 45,000 dwellings are expected to be delivered in Riyadh and 9,000 in Jeddah over the rest of this year.
This supply is driven by the Ministry of Housing’s various initiatives to increase home ownership in the Kingdom to 70 percent by 2030.
In terms of performance, sale prices in Riyadh grew by 5 percent in the first quarter of the year, compared to previous year, while asking rents for both apartments and villas rose by 3 percent, according to the research.
In annual terms, Jeddah’s average residential prices saw an increase of 2 percent, while rents were up 5 percent in the port city, mainly driven by a jump in demand in the north-eastern and southern districts of the city.
Some neighborhoods are currently under redevelopment, leading to local residents shifting to other parts of Jeddah.
Saudi authorities have outlined that the initiative will deliver new, better-quality housing which will widen the options available to Jeddah’s residents.
As for Riyadh, the ambitious target to double its population to 15-20 million by 2030 suggests that the number of households will continue to grow in the coming years, with “investment in new housing anticipated to help meet the growing demand.”
The Saudi real estate sector continued to improve in the first quarter, as tourist numbers increased, providing a boost in the hospitality sector and consumers returned to retail outlets, while demand for office space was driven by more positive business sentiment, according to the research.
In Jeddah, around 16,000 square meter of office Gross Leasable Area came online in the first quarter of the year, increasing the city’s total stock to 1.1 million square meter.
In Riyadh, there were no notable completions over the same period, thus the capital’s total office stock remained stable at 4.8 million square meter, the research showed.
An additional 40,000 square meter and 406,000 square meter of office GLA is expected to enter the market in Jeddah and Riyadh, respectively, over the remainder of this year.
In-line with improving economic conditions and rising business activity in the first quarter of this year, office performance improved across the kingdom.
In Riyadh, average rents across a basket of Grade A & B office buildings increased by 8 percent from a previous year to over SR1,200 ($320) per square meter.
In Jeddah, lease rates saw a smaller rise of 3 percent to an average of around SR850 per square meter.
Furthermore, Riyadh’s market-wide vacancy rate edged down to 4 percent in Q1 2022 from 5 percent a year earlier, the research said.
Over the same period, the average vacancy rate for Jeddah dropped by 8 percent points to 11 percent, “mainly driven by a combination of rising demand from semi-government entities, private businesses taking on more floor-space and tenants relocating from the south to better quality buildings in other locations across the city,” according to the report.
Saudi Arabia’s office sector is expected to sustain its momentum, at least in the short-term, the research argues.
In Riyadh, office demand will continue to grow with a push from the government’s aim to establish the capital as a pre-eminent business hub and the Project HQ initiative.
In Jeddah, limited supply and strengthening demand for office space should exert further upward pressure on rental values, the research added.
Only around 6,000 square meter of retail GLA was delivered in Riyadh in the first quarter, due to project delays, bringing the capital’s total stock to 3.2 million square meter.
Jeddah’s total retail stock reached 1.7 million square meter with the completion of approximately 11,000 square meter, during the same period.
Some 235,000 square meter of retail floorspace is scheduled to enter the market in Riyadh and about 124,000 square meter in Jeddah, over the remaining nine months of this year, the research said.
Rents for super regional and regional malls decreased by 5 percent and 7 percent, respectively, in Riyadh in the first quarter of this year, compared to the same period of last year.
In Jeddah, rents on average fell by 1 percent across super regional malls and declined by 5 percent for regional malls, on a yearly basis.
As per the availability across the two cities, the picture is “mixed”.
Riyadh’s market-wide retail vacancy rate dropped to 19 percent in the first quarter as retailers took advantage of lower rents, whilst the figure for Jeddah edged up to 14 percent.
“Developers are increasingly focusing on creating unique F&B and entertainment experiences to attract footfall given the rebound being witnessed in these segments,” the report said.
Comscore, which reports box office numbers, recently noted that revenues across the Kingdom rose by 95 percent in 2021 compared to the previous year.
Saudi Arabia ranked first in West Asia last year as the biggest market for cinemas in terms of total box office revenues, at $238 million, surpassing the UAE.
The Minister of Investment recently highlighted the government’s aim to attract investment in new real estate projects, including within Riyadh’s retail and entertainment sectors.
Riyadh’s total stock of hotel and hotel apartment keys remained steady at approximately 20,000 in the first quarter with no new projects delivered, while 220 keys were added to Jeddah’s total stock which rose to around 15,200.
Around 4,300 keys are scheduled to be delivered in the capital and 2,500 in Jeddah in the remaining nine months of this year, the research showed.
Riyadh’s hotel occupancy jumped to over 71 percent in the first two months of 2022, from nearly 51 percent in the same period of last year, and the average daily rate, or ADR, surged to $180, up 19 percent from the previous year.
Unsurprising, the capital’s RevPAR was up two-thirds to $128 when compared to the same part of 2021.
Jeddah’s occupancy rate ticked up by 2 percent points annually to 46 percent over January – February, 2022 but ADR saw a double-digit decline to $150 – which explains the 13 percent drop from the previous year in RevPAR to $70.
Some SR4.2 billion was allocated to deliver more than 15,000 hotel keys through the Tourism Development Fund across nine tourist destinations in the kingdom in the fiscal year 2021, according to the Saudi budget statement for the fiscal year 2022.
General and detailed plans will be prepared for 15 tourist locations in the fiscal year 2022, according to the statement.
The Ministry of Hajj and Umrah announced at the beginning of April that 23 million Umrah permits had been issued to date to citizens, residents and visitors during the month of Ramadan.
According to the research, Saudi Arabia is set to see higher numbers of pilgrims traveling to the country to perform Hajj and Umrah since the elimination of social distancing measures at the two holy mosques, which are now operating at full capacity.
Trips made by Saudi citizens and residents unrelated to Hajj and Umrah within the Kingdom rose by 76 percent in the fourth quarter compared to previous year, due to easing restrictions. the research added.