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Average rental rates in Riyadh Office Real Estate market: Ken Research

Posted on 13 December 2017 by KenResearch Manufacturing And Construction ,

The rental rate charged by office real estate developers in Riyadh varies across different building categories as well as location. It is evident that average rental rates across major business streets such as King Fahad road and Olaya Street are much higher because of better location and infrastructure facilities. Within these areas the rent may vary depending on net area under lease, whether the company is private or government owned as well as type of company. As reported at the end of March 2013 rental rates were SAR ~for Grade B offices and SAR ~ in Grade A office buildings. Rental rate at the end of 2016 was estimated at the average value of SAR ~. Rentals were lowest in Ayesha bint Abu Bakkar road and maximum on Northern ring road.

Saudi Arabia Office Real Estate Market

Government’s aim to diversify the economy has attracted the development of manufacturing and services sector to open their businesses in Saudi Arabia creating a substantial demand for office spaces in the country. Private participation has further boosted the development and demand of office space in Saudi Arabia. Programs such as Vision 2030 were launched in April 2016 and National Transformation Program (NTP) was launched in June 2016 with an aim to develop different sectors of the economy

and country are expected to give positive boost to the economy. Riyadh will continue to lead the office real estate market in Saudi Arabia followed by Jeddah.

What is the potential of Riyadh office real estate market?

The total office real estate supply in Riyadh increased from ~ million square meters during 2013 to ~ million square meters of gross leasing area during 2016, registering a CAGR of ~% during the same period. Demand during the same period was lower than the supply. Total occupied office space increased from ~ million square meters during 2013 to approximately ~ million square meters during 2016, achieving a CAGR of ~% during the same period. Completion of Alajlan Tower (~ Sq m) and Al Tamaiouz Tower (~ Sqm), Olaya towers, MIG tower made significant contribution to the retail office space during the estimation period of 2013-2016.

Constant oversupply in the market has made the rental stay stable.On analyzing the supply demand gap market in Riyadh office real estate market it was observed that the gap was on constant increase mainly due to addition of more and more office space area even though the demand was less and vacancy of existing properties was on rise. In 2013, the office supply exceeded the demand by ~ thousand square meters which increased to ~ thousand square meters in 2016. Demand was on decline mainly due to fall in oil prices which have badly hit the economy affecting the opening and expansion of business leading to poor demand for office space rentals.

Riyadh office real estate market segmentation by location

Central Business District was the key offices real estate market in Riyadh accounting for ~% (~ Sqm) of the net GLA available for leasing and renting in 2016. Most of the office buildings are located in close proximity to King Fahad Road and Olaya Road. Many Grade A office spaces are located in this region of the city making it a prime office location in the country. The city core area supply ~% of the GLA with the average rentals in the city core which comprises locations like King Saud Road, Salahuddin Ayoubi Road range between SAR ~ to SAR ~ per square meter. The northern part has emerged as the new region for developing office spaces in the Riyadh. In 2016, only ~% of the office spaces in

Future outlook to office demand and supply

Supply of office real estate is expected to increase from ~ million square meters in 2017 to ~ million square meters in 2019 which will further rise to ~ million square meter in 2021 Completion of Riyadh metro will make north a more attractive option for new and upcoming offices. It is expected that completion of KAFD, ITCC and Nakhla tower will add an estimated ~ million square meter. This will make the northern part of Riyadh a key office destination replacing CBD. Majority of the office space developed in this area is of the A and B type. Governments plan to cut down the staff by ~% may have negative impact on the Riyadh office space market, however plans such as Vision 2030 and NTP 2020 is expected to have positive impact on the demand for office spaces in the city.

For more information on the research report, refer to below link:

Source: https://www.kenresearch.com/manufacturing-and-construction/real-estate/riyadh-office-real-estate-market/142284-97.html

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Ken Research
Ankur Gupta, Head Marketing & Communications
ankur [@] kenresearch.com
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