Saudi Arabia’s real estate market maintained its growth momentum in the second quarter of the year, with most of the sectors recording high levels of activity across the kingdom’s major cities, according real estate industry expert CBRE.
Looking at the kingdom’s office sector figures, occupier demand from international and government entities continued to be prevalent in Riyadh, stated CBRE in its Q2 report.
Office rents in the Saudi capital maintained strong performance levels, with Grade A rents growing by 12.2% and Grade B rents rising by 14.4% year-on-year to Q2 2023.
Average occupancy for both segments in the capital also rose, with Grade A occupancy reaching 99.9% and Grade B offices now standing at 99.4%. In Jeddah, the Grade A segment recorded the highest rate of growth in rents among CBRE’s tracked cities, as average rents grew by 20.7% in the year to Q2 2023, while Grade B office rents improved marginally by 1.0% over the same period.
Average occupancy for both segments rose, as Grade A and Grade B occupancies now stand at 92.5% and 80.0%, up 4.8% and 5.4% from a year earlier respectively. In the year to Q2 2023, Dammam’s Grade A rents increased by 7.6%, while Grade B offices saw an uptick of 1.6%.
As for Khobar, Grade A rents surged by 10.8%. In terms of average occupancy, the Grade A segments registered 82.2% for Dammam and 81.0% for Khobar, while Dammam’s Grade B office segment stood at 67.6% at Q2 2023, it stated.
On the residential sector, CBRE said the total number of residential transactions fell by 38.1% in the year to June 2023, whilst the total value of these transactions, which reached SR26.8 billion, fell by 30.4% over the same period.
Furthermore, as per the latest data available, year-on-year in the year to May 2023, the total number of mortgage contracts issued highlighted a drop of 35.9%, and the total value of these contracts fell 37.9% over the same period, it stated.
In the 12 months to Q2 2023, average prices for apartments in Riyadh and Dammam rose by 22.9% and 2.4% respectively, while Khobar and Jeddah saw price declines of 4.3% and 3.5%, respectively.
In terms of average villa prices, all four major cities saw prices rise in the year to Q2 2023, with Riyadh, Jeddah, Dammam and Khobar registering improvements of 3.9%, 5.0%, 20.0% and 2.3% respectively.
On the industrial and logistics sector, CBRe said the average rents in Riyadh, Khobar and Dammam have seen rental growth in the year to Q2 2023.
Jeddah was the only location to defy this trend. During this period, Dammam and Khobar recorded the highest average rent among the tracked cities at SAR 250 per square metre, which represents an increase of 20.2% in Khobar and 18.7% in Dammam in the 12 months to Q2 2023.
Riyadh’s average rent saw a marked improvement by 36.9% in the year to Q2 2023 standing at SAR 198 per square metre. While we have seen a strong rate of growth on an annual basis, the quarterly data is indicating some signs of moderation. More so, within the city, Western Riyadh represented the lowest average cost in the city of SAR 158 per square metre, while the highest average price was SAR 261 per square metre in Eastern Riyadh.
In Jeddah, average rents softened by 10.4% during the year to Q2 2023, where average rents now stand at SAR 181 per square metre. While rents have fallen on an annual basis, average rents grew on a quarterly basis by 1.1%.
Taimur Khan, Head of Research – Mena at CBRE, said: "In the second quarter of 2023, Saudi Arabia’s real estate market continued to see its positive momentum continue. Market segments such as the Kingdom’s hospitality, industrial and office sector have recorded strong rates of growth on the back of an influx of demand or a lack of suitable supply, or in some cases both."
"However, one sector which has bucked the wider trend has been Saudi Arabia’s residential sector. Heightened affordability challenges, combined with a lack of suitable stock has meant that the number of residential transactions volumes fell sharply in the first half of 2023, compared to a year earlier, albeit with prices increasing in most parts," he noted.
According to him, the Saudi government has introduced a number of solutions such as the Dhamanat company, which, was announced in July 2023, and aims to broaden the segment of the population which would be eligible to access mortgages.
This combined, with new stock, will likely begin to alleviate the pressure on this sector, however we do not expect this to be imminent, he added.-TradeArabia News Service
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