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Riyadh Grade A office space rents rise 6.2% amid rising demand

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  • The demand for hotel rooms in Saudi Arabia will remain robust, says Knight Frank

Lease rates for Grade A office space in Riyadh rose by 6.2% year on year to SAR 1,885 per square foot in the first half of 2023, Knight Frank said in its latest Saudi Commercial Market Review H1 2023.

The occupancy rate reached 97%, partly influenced by the regional headquarters programme, which has witnessed over 44 international companies committing to establish their regional headquarters in Riyadh, the real estate consultancy stated.

However, the scarcity of prime Grade A office spaces in the Saudi capital has forced businesses to move into Grade B spaces, resulting in a substantial 17.3% rise in Grade B lease rates, averaging SAR 1,050 per square meter.

“A perfect storm of office demand in Riyadh is supporting the rental growth being experienced across the market,” said Faisal Durrani, Partner – Head of Research, MENA, Knight Frank. 

“Program HQ, combined with the emergence of new public-sector linked entities, rising rates of job creation, fall in unemployment levels, plus the rising tide of global businesses looking to expand or establish a presence in the Kingdom, are together driving up rents and occupancy levels,” he added.

Meanwhile, the retail sector’s outlook remains positive, with Riyadh witnessing a 2.9% YoY increase in lease rates for regional and super regional malls, compared with Jeddah’s 5.7% decline over the same period. 

The outlook for the retail sector remains very positive, driven by a robust demand from the F&B scene, experiential retail and a steady demand for luxury retail, said Jonathan Pagett, Partner – Retail Advisory, KSA at Knight Frank

Saudi Arabia’s retail sector is expected to grow to SAR 596 billion by 2024, becoming the largest market in the region, he stated.

The demand for hotel rooms in Saudi Arabia will remain robust, driven by seasonal events, festivals, corporate activities, and the continuous expansion of the country’s tourism sector, said Turab Saleem, Partner, Head of Hospitality, Tourism & Leisure Advisory, Knight Frank.

The kingdom aims to attract 150 million tourist visits by 2030, a substantial 50% increase from its prior target of 100 million tourists by the close of the decade. 

Saudi Arabia currently has the world’s most extensive hotel development pipeline, reaching 289,000 new rooms by 2030, nearly doubling the hotel room inventory in Dubai, Saleem said.

(Editing by Seban Scaria )


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