Riyadh, Saudi Arabia — Most of Saudi Arabia’s real estate market sectors recorded growth in the second quarter of 2023, with Grade A office rents in the capital Riyadh growing by 12.2 percent and Grade B rents rising by 14.4 percent year-on-year.
Average occupancy for both segments in the capital also rose, with Grade A occupancy reaching 99.9 percent and Grade B offices now standing at 99.4 percent, real estate services and investment firm CBRE Group said in a statement.
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 percent in the year to Q2 2023, while Grade B office rents improved marginally by 1.0 percent over the same period.
Average occupancy for both segments rose, as Grade A and Grade B occupancies now stand at 92.5 percent and 80 percent up 4.8 percent and 5.4 percent from a year earlier respectively, the statement said.
Residential Sector
The residential sector saw a decline in transaction volumes, with the total number of residential transactions falling by 38.1 percent in the year to June 2023. However, average prices for apartments in Riyadh and Dammam rose by 22.9 percent and 2.4 percent respectively, while Khobar and Jeddah saw price declines of 4.3 percent and 3.5 percent, respectively.
Hospitality Sector
The hospitality sector saw positive headline figures across the three key performance indicators (KPIs) year-on-year in the year to date to June 2023. On a country level, the Kingdom saw an 8.4 percentage points rise in average occupancy and 25.2 percent growth in ADRs, resulting in an increase of 44.4 percent in the country’s RevPAR.
Industrial and Logistics Sector
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 meter, which represents an increase of 20.2 percent in Khobar and 18.7 percent in Dammam in the 12 months to Q2 2023.
Taimur Khan, Head of Research – MENA at CBRE, said, the residential sector bucked the growth trend as 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.
“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 said.