Regional Landscape Of Saudi Arabian Retail Real Estate Market: Ken Researchby Rati Ram Business Developer
Riyadh: The retail real estate supply gross leasable area was about ~ million Sq M in 2013 which further increased to ~ million Sq M in 2018 having the most growth in Saudi Arabia. The occupancy rate was estimated to be around ~% in 2018. The major supply of space was occupied by super-regional and regional malls.
Jeddah: The gross leasable retail area in Jeddah was about ~ million Sq M in 2013 which increased at a CAGR of ~% and reached ~ million Sq M during 2018. The majority of supply was concentrated towards super-regional malls which were evaluated to be ~% of the total supply. The occupancy during 2018 was ~%.
DMA: DMA is a budding market for retail space and had a little growth in terms of gross leasable area delivered during the review period. The retail space supply in 2013 was ~ million Sq M, which increased to ~ million Sq M in 2018 with occupancy being ~%.
Makkah: The majority of the retail supply in Makkah is concentrated towards the neighborhood shops and the new developments of super-regional and regional malls are mostly happening on the outskirts of city. The retail space supply in Makkah was ~ million Sq M in 2013 and it increased to ~ million Sq M. The occupancy in the region was about ~% in 2018.
Saudi Arabia Retail Real Estate Market Future Outlook And Projections
The retail sector has a positive outlook in future due to various government policy changes and initiatives such as allowing ~% FDI in retail sector in 2016, construction of new properties as per the Saudi Vision 2030 and others. However, some of the major projects are expected to delay from their earlier completion timeline. The focus on increasing household expenditure on cultural and entertainment activities to ~% by 2030 is expected to result in opening of over ~ cinemas and ~ screens across KSA by 2030. Therefore a number of existing retail centers are undergoing repositioning and/or refurbishment in order to be able to accommodate these new anchor tenants.
How Is The Saudi Arabia Hotel Real Estate Market Positioned?
The hotel market in Saudi Arabia is undergoing transition due to stern measures by government as there is dip in crude oil prices. The introduction of expat levy, increase in Iqama fees and other policies has impacted the investor sentiment in the region. However, as the government is planning to reduce its dependency on oil revenues, it is making key investments in developing region as an entertainment destination which will have a positive impact on the hotel market. The Vision 2030 focuses on increasing GDP contribution from tourism and for this the government initiated major projects such as Qiddiya Project, Red Sea Project, Neom, Amaala Project and others. The total number of tourist’s arrivals in Saudi Arabia in 2017 was ~ million which increased to ~ million, thus registering a growth of ~%. As of 2017, the leisure demand for hotels in major cities such as Riyadh was ~%, Jeddah was ~% and DMA was ~% of the total demand, the government wants to increase the domestic and international visitors and at the same time wants to decrease the outbound tourism of the country. The number of hotels in Saudi Arabia increased from ~ in 2017 to ~ in 2018.The number of rooms increased from ~ to ~ with growth of ~% in the period.
What Are The Factors Affecting Hotel Real Estate Sector In Saudi Arabia?
Tourism in Saudi Arabia: In 2018, the number of tourists in Saudi Arabia were ~ million. Out of these, ~ million visited in the month of Muharram and approximately ~ million tourists in the month of Ramadan. In 2018, about ~ million foreign pilgrims visited Makkah for Hajj, whereas the domestic pilgrims were ~ million, ~ million in total. Business tourism has been the major contributor for tourism in Saudi, however government has implemented various initiatives to enhance the leisure tourism in the country.
Saudization: Saudization is the Saudi Nationalization Scheme created to increase the employment of Saudi nationals in the private sector. As per, Jawazat Saudi Arabia Forum in first quarter of 2018 ~ expatriates departed on final exit visa which created more employment opportunities for Saudi nationals. Foreign nationals employed in Hotel industry are leaving the Kingdom in response to increase in the cost of living.
Current And Future Hotel Demand And Supply
The hotel offerings have severely increased in Saudi Arabia due to key interest by several international hotel groups. The supply in the number of keys (hotel rooms) increased from ~ in 2013 to ~ in 2018 growing at an average of ~% over the years 2013-2018.
Cities such as Riyadh, Jeddah, Makkah and Madinah are the major tourist’s attractions and are considerably increasing their hospitality offerings; on the other hand a number of smaller destinations such as DMA and Jazan are to rise as attractive opportunity markets.
Marriott International opened the country’s first two aloft hotels in Riyadh and Dhahran in 2016. In 2017, Rocco Forte Hotels open the Assila hotel in Jeddah and in 2018 both Hilton and Swiss-Belhotel International each opened three hotels over the course of the year. Groups including Accor and InterContinental are also looking to expand into new locations across the country.
The demand for hotel rooms in Saudi Arabia was estimated to be around ~ with occupancy being at ~% in 2013. The demand later increased to ~ rooms in 2018; however occupancy declined to ~%. The demand in number of hotel rooms witnessed a CAGR of ~% during 2013-2018. The demand will be supported by increase in the leisure tourism in Saudi Arabia, growth in business tourism and increase in the number of pilgrims visiting for Hajj and Umrah in Saudi.
Regional Landscape Of Saudi Arabian Hotel Real Estate Market
Riyadh: Major hotel properties such as Hyatt Regency Olaya, Ascott Rafal Olaya, Best Western and Fursan Hotel entered in the Riyadh market during the review period. However, some of the major projects have been delayed due to the oversupply of hotels in the market. The number of hotel rooms in 2013 were ~ which increased to ~ in 2018 registering a CAGR of ~%. The RevPAR was estimated to be SAR ~ in 2018.
Jeddah: Major hotel properties such as Centro Shaheen, Assila, Ritz Carlton Mövenpick Hotel City, Ramada Jeddah Corniche, Sofitel Jeddah Corniche and others entered in the Jeddah. The number of keys increased to ~ in 2018 from ~ in 2013. The ADR and RevPAR were highest in Jeddah in comparison with other cities in Saudi Arabia in 2018.
DMA: Major hotels in DMA are Golden Tulip Al Khobar Suites, Aloft Dhahran, Radisson Blu Resort Half Moon Bay, Hilton Garden, Park Inn and others. The number of keys in DMA was ~ in 2013 which increased to ~ in 2018.
Makkah: Major hotel properties in city are Pullman ZamZam, Anjum Hotel, Swissotel, Makkah Clock Royal Tower and others. The number of rooms in Makkah was ~ in 2013 which increased to ~ in 2018 growing at a CAGR of ~% during 2013-2018. The ADR was around SAR ~ in 2018.
Saudi Arabia Hotel Real Estate Market Future Outlook And Projections
The hotel industry in Saudi Arabia has witnessed slowdown in performance especially during 2015-2017 due to fall in the crude oil prices. However, the government has implemented corrective measures such as launch of several projects as per the Vision 2030 to increase the contribution of tourism sector in the GDP, increase in Iqama (residency) fees and the introduction of dependent fees in order to boost the Saudi National participation in the workforce and others. The government has made changes in the Visa regulations in order to increase the number of tourists especially leisure tourism and non-religious tourism in the country. They also started issuing Sharek Visa in order to boost the number of Umrah and Hajj visitors in the country.
How Is The Saudi Arabia Office Real Estate Market Positioned?
As per Vision 2030 over ~ mega projects, each project worth at least USD ~ billion are presently underway or planned for completion as per Saudi Vision 2030 NDP. The aim of government is to diversify the economy. In 2016, government announced a SAR ~ billion private sector incentive package to boost the private sector’s growth and increase the rate of employment in the country. These projects also includes mega transportation railway projects such as ~ km railway line linking Riyadh with the Al-Gurayat, King Hamad Causeway, 8 major road connection projects, Abha airport expansion and others. This provides new opportunities for Transit Oriented Development. The office market in Saudi Arabia is witnessing subdue pressure as the rentals have been declining. The rentals and occupancy level has been under pressure since 2016 and this trend is expected to continue as there is oversupply of low quality office spacing. The market has increasing demand for high end office spaces however there is limited supply of such spaces. This scenario is expected to change in future as there is a large pipeline of supply of quality spaces and mixed-development projects.
What Are The Factors Affecting Office Real Estate Sector In Saudi Arabia?
Migration of Expats from Saudi: Government is focusing on creating jobs for Saudi nationals. The government has undertaken various measures for this and one of the most important one has been implementation of dependent levy of expatriates; due to which a majority of foreigners have sent their families to their native and evacuated their houses, thus impacting the overall residential space. The government started imposing SAR ~ a month on expat dependents in July 2017. The fee is set to reach SAR ~ a month by July 2020. As per reports, ~ expatriates departed on final exit visa in first quarter 2018 in comparison with ~ during the same period in 2017. As per Directorate General of Passports (Jawazat) in Riyadh, average of more than ~ foreign workers has left the country every day since the last quarter of 2016.
Foreign Participation: Saudi Arabia General Investment Authority is providing benefits such as allowing foreign investors to take ~% ownership of their companies, Low minimum capital requirement, ability for foreign investors to sponsor foreign employees and others in order to build the investors trust in the Saudi market and attract them.
Current And Future Office Demand And Supply
The GDP of Saudi Arabia expanded by ~% in 2014 which was faster than ~% in 2013. The growth was primarily derived by the positive growth in the hydrocarbons sector after decline in 2012 and 2013. The office real estate market has witnesses major transition as the economy of Saudi Arabia is diversifying dependency from the oil revenue to non-oil sources of revenue. The supply of office space growth at a CAGR of ~% during 2013-2018 with GLA being ~ million Sq M in 2013 which increased to ~ million Sq M in 2018. Some of the major office locations in Riyadh are, Cayan Mefic, Kingdom Tower, Business Gate Granada Business Park, Binayat Center and Raden Center. Major office locations in Jeddah are Ibrahim Center, Randa Tower, Lilian Towers, and Rovan Plaza. DMA also lacks a well defined CBD, majority of office space supply is focused in the Khobar area with the corniche becoming a key commercial location due to ease of access and proximity to ancillary real estate uses. The demand of gross leasable area of office space in Saudi Arabia office was about ~ million Sq M in 2013 which increased to ~ million Sq M in 2018, increasing at a CAGR of ~% during 2013-2018. The demand for office space has been highly influenced by the pricing of oil in the international market. The Saudi economy was not performing well in the early review period as the oil prices were down and there was decrease in the FDI inflow.
Regional Landscape Of Saudi Arabian Office Real Estate Market
Riyadh: The office space supply in Riyadh was estimated to be ~ million Sq M in 2013 which increased to ~ million Sq M in 2018 at a CAGR of ~% during the period. The majority of the supply is of the premium grade quality. The completion of major projects such as KAFD, ITCC and Riyadh Front Projects will create further oversupply of premium and grade-A office spaces. The rentals have been declining in the market as the proprietors are keeping rents low in order to improve the occupancy.
Jeddah: The supply of office space in Jeddah was ~ million Sq M in 2018 increasing from ~ million Sq M in 2013 at a CAGR of ~% in the period. The majority of the supply is of Grade-B quality. Completion of projects such as King Avenue, Al-Rawdah Complex, and Jeddah Gate will increase the presence of high quality spaces. Currently the rentals are low in the market due to excess supply of poor quality office space.
DMA: DMA has an office space supply of ~ million Sq M in 2018 increasing at a CAGR of ~% from ~ million Sq M in 2013. DMA's office market is highly dependent on the oil industry. The headquarters of Saudi's biggest public company Saudi Aramco is located in Dhahran. The region is also the industrial and logistical hub. The occupancy has been low in the region.
Saudi Arabia Office Real Estate Market Future Outlook And Projections
Saudi Arabia office market is going through transition and is expected to witness growth in supply due to government’s initiatives such as Vision 2030, NTP, growth of SME and other factors. The supply for premium and Grade-A office spaces will grow as some major projects including Neom project, KAFD, ITCC, Jeddah Towers and others will be completed in the upcoming years thus boosting the supply. However, the supply and demand gap will keep on fluctuating as there is oversupply of office space in the region. This will impact the rentals also, thus keeping them low in the short run. Saudi market will witness change in office trends due to development of themed office spaces, mixed-development projects and co-working spaces.
How Is The Saudi Arabia Residential Real Estate Market Positioned?
The Residential real estate industry in Saudi Arabia has been facing increase in demand for affordable housing units. The market has declined due to slowdown in the economy as the market for oil has been declining. Further, the focus of government on Saudization has resulted in implementation of policies which are not expatriates friendly. Implementation of rules such as dependent fees has resulted in exodus of expatriates. This has further declined the demand in the residential real estate market. In the beginning of this decade there was shortage of housing spaces, lack of mortgage law and other problems which were in the market. It was estimated that Saudi Arabia needed at least ~ Million of housing units over the coming years to tackle the shortage of affordable housing. This led to government reforms and the first mortgage law was implemented in 2012. The government also launched initiatives to build ~ units of housing over the next few years. The government has been actively working on the issue of housing and has made various structural changes for dealing with this issue. It has also undertaken several initiatives for increasing the home ownership numbers in Saudi Arabia.
What Are The Factors Affecting Office Real Estate Sector In Saudi Arabia?
Land Transaction by Value and Volume: The value of land transaction in Saudi Arabia is has decreased consecutively over the last four years. In Islamic year 1435 the value of land transaction was SAR ~ billion which declined to SAR ~ billion in year 1439. In 1439, majority of the transactions was in Riyadh region worth SAR ~ billion which was followed by Jeddah having transactions worth SAR ~ billion. This decline is majorly due to poor liquidity, slow economic conditions and newly implemented land tax in the country.
Taxation Policy in Saudi: In April 2017, government started levying a ~% white land tax in order to help making well use of the idle residential as well as commercial lands in Riyadh city and Eastern province. The law will require the owners of lands that are 10,000 M Sq or more to pay ~% of the land’s value as a tax or to start building on it within 12 months. A VAT of ~% was further implemented to provide economic aid to government in 2018.
Current And Future Residential Supply And Demand
In August 2012, MOH signed a series of contracts worth of SAR ~ billion to develop land plots totaling ~ million Sq M throughout the country. The Program will provide infrastructure and public facilities to build ~ residential units to accommodate up to ~ people. This increased the infrastructure projects undertaken by MOH to 57.
The mid and small scale developers have been delivering majority of the projects in the major cities such as Riyadh and Jeddah. However, the affordable housing situation in most of the cities is still inadequate as per the demand. The supply of residential units in Saudi Arabia was evaluated to be around ~ million units as of 2018.
The demand in the various major cities of Saudi such as Riyadh, Jeddah and DMA has traditionally grown due to the increase in demand for mid to low price housing projects which has been majorly overlooked by the developers. This growth can be attributed to the growing population and early marriage trend in the country. The developers have overlooked this segment due to the lower development margins. Government has tried to implement various policies in order to increase the affordability of the housing and has developed major projects in order to provide housing in the country which has tried to fill the demand and supply gap in the region.
Regional Landscape Of Saudi Arabian Residential Real Estate Market
Riyadh: The housing supply in Riyadh was evaluated to be ~ million units in 2013 which increased to ~ million units in 2018 at a CAGR of ~% during the period. Majority of the housing units were Apartments and Villas and has been concentrated towards the northern part of the city beyond King Salman Road.
Jeddah: Housing Supply in Jeddah was evaluated to be around ~ thousand units in 2018 increasing at a CAGR of ~% from ~ units in 2013. The majority of the supply has been concentrated towards middle-income housing groups. The majority of the projects are concentrated in the northern part of the city. The growth in Jeddah will be mainly due to the growth in population.
DMA: The housing supply in DMA was about ~ thousand units in 2013 which increased to ~ thousand units in 2018 at a CAGR of ~% in 2013-2018. The supply of housing units is growing due to government initiatives such as White Land Tax and Sakani Housing Program.
Makkah: The housing units supply in Makkah was evaluated to be around ~ thousand units in 2013 and it increased at a CAGR of ~% reaching to about ~ million in 2018. New residential units are majorly developing on the outer districts as the main city is already concentrated.
Saudi Arabia Residential Real Estate Market Future Outlook And Projections
The residential market in the KSA has positive outlook due to the multiple reforms undertaken by the government such as Saudi Vision 2030 and the National Transformation Program. These reforms will help in tackling obstacles such as the high land prices and the imbalance between demand and supply. There are various projects such as "East Gate Project". This project consists ~ villas and is further estimated to cost approximately SAR ~ billion. East Gate is considered as one of the leading fully integrated affordable housing projects in the KSA, extending across ~ million Sq M of land and providing around ~ residential villas in total. The MOH in 2018 announced the start of booking procedures in 6 new projects.
Comparative Landscape In Saudi Arabia Real Estate Market
The government's vision of reducing the reliance on oil economy and diversifying into other sectors especially on real estate has resulted in growth of the real estate industry in Saudi Arabia The market has high competition where the demand for new properties is increase due to growth in the commercial activities and increase in competition. Some of the major real estate development companies operating in the Saudi are Al Saedan Real Estate, Kingdom Holding Company, Ewaan, Al Ra'idah Investment Company, SEDCO Development, Jabal Omar Development Company, Makkah Construction & Development Co, Emaar, Dar Alarkan Real Estate Development Co and Saudi Taiba Investment and Real Estate Development Co. Competition among developers majorly happens on the parameters such as land bank, location of the property, upcoming projects, construction costs, reputation of the company and other parameters.
For more information on the research report, refer to below link:
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Created on Dec 11th 2019 03:19. Viewed 112 times.