RESETTING IN THE NEW NORMAL 20 21 - Amazon AWS
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CBRE RESEARCH | KSA
KSA
R E A L E S TAT E M A R K E T O U T LO O K
RESETTING
IN THE NEW
NORMAL
CBRE RESEARCH | INDIA
THE NEW NORMAL ECONOMY RESIDENTIAL OFFICE RETAIL HOSPITALITY I&L FUTURE CONTACT US
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K S A R E A L E S TAT E I N N E W N O R M A L
A M B I T I O U S P L A N S F O R T H E K I N G D O M D R I V I N G L O N G -T E R M G R O W T H ,
W I T H V I S I O N 2 0 3 0 AT T H E F O R E F R O N T
ECONOMY RESIDENTIAL OFFICE RETAIL HOSPITALITY I&L
REcover REevaluate REassess REdefine REinvent REstructure
Rebound in GDP Residential offering Physical offices to stay; Retail formats and Strengthening recovery Network, diversified and
anticipated as travel shifting towards more portfolio optimization configurations to realign; in 2021, with long-term tech-enhanced supply
restrictions are lifted efficient layouts with and hybrid working tech and e-commerce to potential as KSA puts chain to reshape the
and business confidence quality finishing, as anticipated to be drive change. tourism at the core of its sector, with e-commerce
improves. Other developers adapt to dominant themes. strategy leading up to continuing to drive
economic indicators to end-user and investor 2030. logistics requirements.
CBRE RESEARCH | KSA
follow a similar trend. preferences.
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KSA ECONOMY
GAINING MOMENTUM
Government reforms and initiatives, led by Vision 2030
are expected to help country’s aim towards economic
diversification and support future economic growth.
KSA
ECONOMY
The Saudi government is moving PAGE 2
successfully towards achieving its
vaccination plans, currently over Recent initiatives and incentives
15.6m doses have been administered, announced by Crown Prince HRH
equating to 45.5 doses per 100 Mohammad Bin Salman, such as
people. Shareek, aim to support private sector
investment and employment and will
play a key role in boosting the overall
economy and achieving the ambitions
of Vision 2030.
CBRE RESEARCH | KSA
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KSA ECONOMY
GAINING MOMENTUM
Figure 1: Saudi Arabia GDP Growth (2019 – 2022) Figure 2: GDP Forecast for GCC economies
4.0% 3.4% 3.5%
3.0%
2020 2021
2.0%
4.0% 3.4%
1.0% 3.2% 3.1% 2.9%
0.3% 2.8% KSA
0.0% 2.0% 1.1% ECONOMY
PAGE 3
-1.0% 0.0%
-2.0% -2.0%
-3.0%
-4.0% -3.0%
-4.0%
-6.0% -4.8% -5.3%
-5.0%
-6.4%
-4.8%
-6.0%
-8.0% -7.8% -7.7%
-10.0%
CBRE RESEARCH | KSA
2019 2020 2021 2022
SAUDI ARABIA OMAN KUWAIT BAHRAIN QATAR UAE
Source: CBRE Research & Analysis, Oxford Economics
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KSA ECONOMY
GAINING MOMENTUM
• A 0.2% rate of deflation was recorded in 2019. By 2020, inflation
Key economic indicators, such as FOREX reserves and oil prices, are Key government initiatives are likely to have an impact
surged to 5.4%, driven primarily by the increase in VAT from 5% to
expected to improve in 2021 and support increased economic output. on the KSA’s real estate market in the short to medium
15% in July 2020.
Table 1: KSA Key Economic Indicators (2019 - 2021) term:
• Moving forward, It is expected that the rate of inflation will fall to
0.6% in 2021.
• Saudi Arabia’s Crown Prince, HRH Mohammed bin
Salman, announced the Saudi Arabia Green Initiative,
which aims to uplift green spaces across the Kingdom
to help reduce carbon emissions, pollution and land
Forex Oil Prices degradation, while enhancing the quality of life for
FDI Manufacturing residents.
Reserves (USD per Inflation
(in USD mn) Barrel)
(in USD mn) PMI
• The introduction of the “Shareek Program,” aims to
strengthen public-private partnerships and collaboration,
2019 488,245 64.3 -8,984 56.9 -0.2% facilitating investment of 1.3 trillion USD by 2030 to
support business opportunities, employment and the wider
2020 479,284 41.9 -7,152 57.0 5.4% economy.
• The Public Investment Fund (PIF) announced the expansion
CBRE RESEARCH | KSA
2021 517,242 58.5* -6,747 56.4** 0.6% of the fund to ~1.1 trillion USD by 2025, creating new
investment opportunities and supporting economic growth.
• The government introduced a 5% real estate transaction
tax replacing the 15% VAT on real estate transactions.
Source : Saudi Central Bank, Oxford Economics, Macrobond
* Estimated ** May 2021
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RESIDENTIAL
‘ R E ’ - E VA LUAT I N G L I V I N G S PAC E S
Establishment of the
Ministry of Rural Affairs & Housing leading the
ROSHN Real Estate
transformation and growth of the residential sector, The impact of COVID-19 has shed light on staff
Company by the PIF aims
by offering financing and housing solutions for and labour accommodation projects, impacting
to strengthen the quality
both investors and end-users, with the aim of space requirements and increased focus on filling
of life by developing
supporting the Vision 2030 objective of increasing the the market gap for quality product featuring
quality residential districts
homeownership rate to 70% by 2030. sufficient facilities and amenities.
within community living
environments.
Increased demand witnessed
across major markets for smaller
residential typologies, with
Millennials emerging as a key increased focus on community
consumer class, with reconfiguration living environment. Developers
of residential spaces expected as well are responding by introducing
as increased demand for digitally greater proportion of apartments
enabled homes and larger unit sizes and townhouses within their
to accommodate home offices. mega projects.
CBRE RESEARCH | KSA
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OFFICE
‘RE’ASSESSING THE WORKPLACE
Evolution of a ‘traditional’ to
‘hybrid’ workforce via work-from Workplace strategies would Environmental,
anywhere to ensure Business involve repositioning spaces, Social and Corporate
Recent government initiatives for regional Continuity. Occupiers are still amenities and services to Governance (ESG),
HQ’s to be based in the kingdom will force working on their long term future Increased flexibility from local meet changing employee health and wellness
regional occupiers to review their office occupational strategies across their landlords to be critical to future needs; enhanced tech likely to be at the
footprint across the Middle East and start regional portfolio. success. Rapid move away tools to transform the way forefront of CRE
planning for the long term. The KSA will from traditional lease terms commercial properties strategies as well as
undoubtedly benefit from increased market and structures to improve are being designed and future supply in line with
share of office occupiers in the region. leasing absorption and remain marketed. recently announced
Key government initiatives being competitive with other dominant government initiatives.
introduced across the kingdom to office markets in the region.
support and encourage innovation Significant increase
and technology with investors in new Grade A
aiming to deliver schemes that supply expected to be
can adapt to the future of the delivered in the next
workplace. 12-24 months resulting
in a flight to quality
for occupiers and will
Physical offices here to stay; Development is expected set new benchmarks
portfolio optimization via the right to continue to move away for developers in the
CBRE RESEARCH | KSA
mix of traditional, flexible spaces standalone office towers Kingdom.
and any relevant remote working to mixed-use communities,
strategy. which offer vibrant and
accessible live-work-play
settings such as Digital City
and the upcoming King
Abdullah Financial District.
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R E TA I L
‘ R E ’ D E F I N I N G T H E C U S TO M E R E X P E R I E N C E
An increased focus on reinventing the
New wave of supply is expected
“experience”; realignment of existing
to force retailers to transform their
spaces expected as emphasis on
Rapid growth of online business led by technologies that
outdoor and open areas to increase.
Accelerated growth in e-commerce shopping is likely to result in improve the customer experience,
New stores to adopt more global
expected; QSRs, grocery, F&B, more omni-channel retail, allow cost optimization and enable
guidelines and synergies with store size
electronics and homeware segments however, preserving the agility.
optimization expected to allow for faster
to lead retail recovery while local “physical experience” will
recovery and better profitability.
e-commerce providers continue to be a critical component of
increase market share. these omnichannel strategies,
particularly in the KSA.
Landlords will be expected to Signature assets due to be delivered
provide increased flexibility to in the Kingdom over the next 12-24
remain successful – flexible months are expected to elevate the
lease terms, schemes with positioning of the KSA’s retail supply,
flexible, convertible and open driving change throughout the investor
spaces to witness greater portfolio by embracing technology and
retailer interest going forward. innovation to create more attractive
leasing opportunities for brands.
CBRE RESEARCH | KSA
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H O S P I TA L I T Y
‘ R E ’ I N V E N T T H E D E S T I N AT I O N
Slower recovery compared to regional
neighbors due to the prolonged closure Pre-COVID challenges have not dissipated
of borders to international tourists until and issues such as recruitment of adequately
May 17th 2021, this particularly impacted skilled Saudi nationals will continue to provide
religious tourism and to a lesser extent challenges for the sector in the short to
corporate tourism. The closure of borders medium term.
and restrictions on travel for Saudi
nationals has provided significant support Despite the current challenges
for domestic tourism. of the industry, investors’
confidence in the country’s
Government-led projects are potential remains high, bolstered
expected to become the powerhouse by government-led initiatives
Hoteliers have made cost reductions, of the tourism sector in KSA once and projects. Investment
mainly through salary cuts and efficiency fully completed. The delivery of the activity is driven mainly by new
creation. Whilst salaries are reverting first phases of projects such as the developments and few hotel
back to normal, reductions and Red Sea or AlUla will participate in transactions happen.
rationalizations are here to stay as they the creation of a new perception
have have little or no impact on a guests’ of the KSA as a leisure tourism
CBRE RESEARCH | KSA
experience, but do contribute to higher destination.
GOPs.
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INDUSTRIAL & LOGISTICS
‘RE’STRUCTURING T H E S E C TO R
Focus on food security Substantial growth in the
Given the relatively nascent
and cold storage space e-commerce sector and an
nature of the sector in
is expected to form a key ever-growing list of regional
the Kingdom, particularly
The Kingdom’s National Industrial component of speculative and international pure play
for occupiers focusing on
Development and Logistics Program development in the and multi-channel retailers
its domestic market, we
sets out a broad plan to transform industrial and logistics entering the Saudi market will
are likely to see less of
Saudi Arabia into a global industrial market. drive demand for fulfilment
a requirement for lease
and logistics hub. Through a range of and distribution facilities.
flexibility as we are seeing on
investment programs and regulatory a global basis.
changes, the program is looking to
develop the country’s Energy, Mining, As the market matures we
Industry and Logistics sectors. expect market performance
to fragment significantly.
Secondary assets and assets
Major infrastructure improvement projects which are not refurbished or
targeting air, rail and road infrastructure, redeveloped to cater to more
combined with plans to establish eight special sophisticated demand, will
economic zones by 2030, will underpin demand face significant pressures on
for institutional quality industrial and logistics occupancy and rental rates.
real estate.
CBRE RESEARCH | KSA
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W H AT D O E S T H E F U T U R E H O L D ?
The Saudi government has consistently launched new reforms, initiatives and ambitious plans as part of its 2030 Vision with
the aim of cementing the Kingdom’s global competitiveness and attracting investors and skilled professionals to the country.
These reforms are expected to support the economy as well as the recovery of the wider real estate market.
Table 2:Impact of Structural Changes across Real Estate Sector in the KSA Figure 3: How are key real estate sectors expected to fare in 2021?
Acceleration of existing trends New structural trends
post COVID-19 post COVID-19 Lower than 2020 Higher than 2020 Similar to 2020
Increased Heightened
Tech- Global Remote
flexibility e-commerce
Stakeholder enhanced penetration supply chain working / Asset Class Outlook Key Driver
of leasing/ diversification WFA
spaces
portfolios
• Occupiers to benefit from downward pressure on
OFFICE performance, expected to remain in the short-term,
OFFICE
with landlords expected to increasingly offer incentives
to support occupancy
• Local and foreign investors to continue expanding
I&L I&L operations within the KSA, increasing demand for
quality warehousing
• Physical retailers expected to increasingly offer
an integrated experience through merging of
RETAIL e-commerce and B&M
RETAIL
• Tourism expected to gradually recover in the long run
• Residents’ F&B & entertainment expenditure continue
CBRE RESEARCH | KSA
to grow
RESIDENTIAL • Residential demand to be driven and supported by
RESIDENTIAL government initiatives led by Ministry of Housing &
Rural Affairs
HOSPITALITY • Rise in domestic tourism and upcoming key events,
HOSPITALITY coupled with gradual easing of travel restrictions
expected to boost demand for hospitality
Source: CBRE Research
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C O N TA C T U S
FOR MORE INFORMATION ABOUT THIS REPORT, PLEASE CONTACT:
Abhinav Joshi Michael Heitmann Gabriella De La Torre Sohaib Hariri Michael Young Bruno Trenchard Taimur Khan
Head of Research - India, Head of Consulting Director, Consulting Senior Analyst, Consulting Head of Advisory & Senior Manager, Head of Research
Middle East & North Africa Michael.Heitmann@cbre.com Gabriella.DelaTorre@cbre.com Sohaib.Hariri@cbre.com Transaction Services Hotels and Hospitality Taimur.Khan@cbre.com
abhinav.joshi@cbre.co.in Michael.Young@cbre.com Bruno.Trenchard@cbre.com
FOR ALL PR AND MARKETING ENQUIRIES:
Nicola Milton
Marketing Manager
Nicola.Milton@cbre.com
FOLLOW CBRE
CBRE RESEARCH | KSA
CBRE Group, Inc., and its subsidiaries in Saudi Arabia confirm that information contained herein, including projections, has been obtained from sources
believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them.
It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and
professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
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© 2021 CBRE, Inc.
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