The KSA Real Estate Market - Research | Q2 2021 - Amazon AWS
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The KSA Real Estate Market Research | Q2 2021
Office
Riyadh DMA
Y-o-Y Y-o-Y
4.4m 340k 948k 10k
sq m GLA sq m GLA 0% sq m GLA sq m GLA -3%
Total stock H2 2021 Expected Average H2 2021 Expected Average
Total stock
deliveries Grade A & B rents deliveries Grade A & B rents
Jeddah Makkah
Y-o-Y Y-o-Y
1.1m 27k 303k 2.2k
sq m GLA sq m GLA -5% sq m GLA sq m GLA -14%
Total stock H2 2021 Expected Average Total stock H2 2021 Expected Average
deliveries Grade A & B rents deliveries Grade A & B rents
Looking at the handover of office space in the Kingdom, In the Capital city, Riyadh, demand for secondary offices As a result, asking rents in Riyadh recorded mixed As for Jeddah and DMA, as companies started migrating to
only 7,900 sqm of office GLA was handed over across the remained sluggish, while demand for high quality grade A performance in Q2 2021, with Grade A rents increasing by Riyadh and adopting new, hybrid working models, most
four main Saudi cities. As such, we expect that many of office spaces continued to improve during the second quarter, 2.6% to SAR 1,380 per sq m, whilst Grade B rents declined by companies have reconsidered their current office spaces and
the projects due for delivery within the year to experience with the Healthcare/Pharma sector being the most active 3.2% to SAR 970 per sq m. Vacancy rates across the city have downsized. This placed downward pressure on landlords,
further delays. Nevertheless, during the second half of the amongst corporate occupiers. Additionally, demand coming remained stable at 5% for the first half of 2021. However, as they were forced to compromise and lower their rates or
year, the office supply in Riyadh is expected to witness a from government sector remains strong, with a preference for these rates are expected to rise as new supply enters the offer incentives to maintain occupancy levels.
significant addition of Grade A quality office buildings, with large, standalone office buildings located in Northern Riyadh, market.
the handover of approximately 340,000 sq m. However, where the city is migrating. Looking ahead, the demand for office space is expected
given historical materialization rates, we remain cautious
As for the rest of KSA, in Makkah, where most offices were to remain strong, as several multinational occupiers are
and expect some delays in handover.
occupied by Hajj and Umrah agencies, occupancy levels considering relocating their regional offices to KSA due to
Elsewhere in the kingdom, only a number of standalone decreased due to the temporary suspension of International the incentives offered by the government. However, the
office towers are scheduled for completion in the remainder religious tourism in the country. This placed severe impact will mainly be concentrated in Riyadh, where the
of the year, as landlords delay the delivery of projects until downward pressure on landlords and resulted in a steep majority of the workforce will be located.
market conditions improve. decrease in average rents.Residential
Riyadh DMA
3% 0% -2% -3%
1.36m 23k Y-o-Y Y-o-Y 366k 8k Y-o-Y Y-o-Y
units units units units
Average Average Average Average
H2 2021 Expected sale prices rental rates H2 2021 Expected sale prices rental rates
Total stock Total stock
deliveries deliveries
Source: MOJ Source: MOJ
Jeddah Makkah
0% -10% -9% -4%
840k 11k Y-o-Y Y-o-Y 404k 7k Y-o-Y Y-o-Y
units units units units
Average Average Average Average
H2 2021 Expected sale prices rental rates Total stock H2 2021 Expected sale prices rental rates
Total stock
deliveries deliveries
As conditions post-COVID stabilize, residential mortgages This brings the total residential supply to 1.3 million and On the other hand, the overall performance of the
registered an annual increase of 48%, with a total value 840,000 in Riyadh and Jeddah, respectively. While the total residential market in Makkah and DMA remained subdued in
of SAR 71.4 billion, during the first five months of 2021 stock for Makkah and DMA stands at 404,000 and 366,000, Q2 2021 as sale prices and rental rates recorded an average
according to the Saudi Central Bank. This is a result of the respectively. annual decline of 7% and 3%, respectively. Meanwhile, sale
strong government support coupled with the low interest prices in Jeddah stabilized whereas rents registered
rates. In terms of performance, asking sale prices for apartments an annual decline of 10% for both villas and apartments.
and villas jumped by almost 10% in West Riyadh when
Moreover, based on the high demand for residential villas, compared to the same period last year. Meanwhile they also
as they represent 80% of total mortgages, the Ministry of increased almost 12% in North of the city over the same
Housing (MOH) Sakani program provided 77,000 housing period.
units to citizens during the first five months of 2021, which is
roughly 55% of the target of 140 thousand units by 2021.
Construction activity in the residential market remained
somewhat active, as various projects were delivered across
the main cities, with around 26,500 units handed over during
the first half of the year.Retail
Riyadh DMA
-8% -2% -6% -3%
3m 220k Y-o-Y Y-o-Y 1.2m 161k Y-o-Y Y-o-Y
sq m GLA sq m GLA sq m GLA sq m GLA
Average rental Average rental Average rental Average rental
rates in super rates in regional rates in super rates in regional
Total stock H2 2021 Expected regional malls malls Total stock H2 2021 Expected regional malls malls
deliveries deliveries
Jeddah Makkah
-4% -6% -24% -8%
1.6m 184k Y-o-Y Y-o-Y 1.3m 36k Y-o-Y Y-o-Y
sq m GLA sq m GLA sq m GLA sq m GLA
Average rental Average rental Average rental Average rental
rates in super rates in regional rates in super rates in regional
Total stock H2 2021 Expected regional malls malls Total stock H2 2021 Expected regional malls malls
deliveries deliveries
As restrictions ease and people adapt to the post pandemic The increase in retail supply resulted in downward pressure Looking ahead, the market is expected to remain tenant Looking ahead, several Saudi retailers announced the adoption
reality, retail markets saw higher footfall in malls and retail on landlords and an increase in market-wide vacancies. friendly thus exerting further pressure on retail performance of hybrid business models to cater to the growing demand
centers. According to the Saudi Central Bank (SAMA), point of To retain tenants, most retail centers’ suspended lease across the main cities. Moreover, with the significant for online presence through adding fulfilment centres and
sale transactions have been increasing over the past few weeks, escalations for the current year and preserved their rates, if amount of retail supply expected to materialize over the enhancing the digital customer experience. These reforms
and almost doubled compared to the same period last year. This not decreased them. next few years, including Riyadh Avenue and Mall of Saudi came along with the notice that e-sales started increasing and
indicates that despite the change in consumer behaviors and in Riyadh, pressure on performance is likely to persist. On a hitting record highs in Saudi Arabia. Furthermore, to sustain
the shift to e-commerce, many customers prefer the “physical Apart from that, performance in community centers remain positive note, the high footfall across malls and retail outlets performance of brick-and-mortar retail, the upcoming supply
experience”. more resilient, as shoppers continue to spend more time in indicate solid economic recovery, which may be reflected on is focused on customer experience by offering unique lifestyle
smaller developments. performance. developments and digitizing the stores to enrich the overall
In terms of supply, over the first half of the year, Riyadh and experience.
Makkah saw the delivery of 28,000 sqm and 57,000 sqm of retail
GLA, respectively. While Jeddah and DMA saw the delivery of
53,000 sqm and 12,000 sqm, respectively.Hospitality
Riyadh YT May 2021
DMA YT May 2021
Occupancy Occupancy
Rate 46% Rate 49%
19k 1.8k ADR’s USD147 9.5k 1k ADR’s USD113
keys keys keys keys
RevPar’s RevPar’s
Total stock H2 2021 Expected USD67 Total stock H2 2021 Expected USD55
deliveries deliveries
Source: STR Global Source: STR Global
YT May 2021 YT May 2021
Jeddah Occupancy
Makkah Occupancy
Rate 42% Rate 21%
14k 1.5k ADR’s USD192 42k 4k ADR’s USD160
keys keys keys keys
RevPar’s RevPar’s
Total stock H2 2021 Expected USD72 Total stock H2 2021 Expected USD34
deliveries deliveries
Source: STR Global Source: STR Global
In comparison to the same period last year, the Saudi Elsewhere in the Kingdom, Riyadh saw the delivery of 590 The annual increases and improvements in performance significant quality hotel projects are expected to materialize.
hospitality sector saw a slight improvement in performance. Keys over the first half of 2021, while Jeddah saw the delivery are due to the comparison with the peak of the pandemic Additionally, with the return of International flights, and in light
Nonetheless, Makkah’s hospitality sector continues to face of only one hotel, as most hotels delayed their openings to and lockdowns during the year 2020. Despite the noticeable of Riyadh becoming a hot business hub, business travels is
pressure as this year’s Hajj will be limited to those who reside in the upcoming Formula 1 event, which is scheduled to begin improvement, pre-pandemic performance is yet to be expected to have major positive impact on hotel performance
Saudi Arabia, with a total of 60,000 domestic pilgrims. on the 5th of December 2021. achieved. moving ahead.
As such, performance levels in Makkah registered 21% in the YT In terms of performance, Riyadh saw occupancy levels On the other hand, DMA saw hotel occupancy levels drop In the short term, domestic tourism is expected to boost
May 2021 compared to the previous year. Revenue per Available drop by 17% compared to the same period last year. While to 49% in the YT May 2021, compared to 51% in the YT May with the launch of the Saudi Summer program “Summer
Room (RevPAR) dropped by 9% in the YT April 2021 compared occupancy levels in Jeddah increased by 5%, compared 2020, average daily rates (ADR’s) increased by 4.5% from the Vibes”, which aims to attract tourists to Saudi’s best summer
to the same period last year. to the same period last year, likewise, Average Daily Rates same period last year to reach USD 113. destinations from the shores to the colder mountain regions. In
(ADR’s) and RevPAR saw slight improvements. addition to that, the Saudi Entertainment Seasons are expected
Looking ahead, under Vision 2030, the hospitality industry to return with larger than ever events, starting with Riyadh
has a promising future. With the kingdom expecting to season during the last quarter of 2021.
host 100 million tourists by the year 2030, along with the
numerous initiatives across different regions. Until then,Definitions and methodology
Future Supply Retail
JLL estimates of future supply is updated on a quarterly basis and is based on primary research (physical Supply
inspections) and secondary research (discussions with developers). The future supply is reflective of projects The classification of retail centers is based on the Urban Land Institute (ULI) definition and based on their
actively under construction. It excludes projects that have been announced, where ground works have not Gross Leasable Area (GLA):
started. We remain cautious of the ability of some projects to meet their stated completion deadlines, with
significant delays in project delivery leading to a low materialization rate. Super Regional Malls have a GLA of above 90,000 sq m
Regional Malls have a GLA of 30,000 - 90,000 sq m
Office Community Malls have a GLA of 10,000 - 30,000 sq m
Supply Neighborhood Malls have a GLA of 3,000 - 10,000 sq m
The current supply of completed office GLA is based on a comprehensive list of office buildings that have been Convenience Malls have a GLA of less than 3,000 sq m
handed over for immediate occupation. This includes standalone office buildings and office space within mixed-
use buildings: The current supply of completed retail GLA is based on a comprehensive list of mall-based retail that have been
In Riyadh, the areas covered include: CBD, North and East Ring Roads, Khurais, Mazer, and Sitteen Streets. handed over for immediate occupation. Our project list excludes street retail and retail within mixed-use buildings.
In Jeddah, the areas covered include: Prince Sultan, Tahlia, King Road, Ibrahim Al Jaffali, Amanah Street, Madinah,
King Abdullah and Rawdah Streets. . Performance
Average rents are based on estimates from the JLL Retail team. It reflects the rents across a basket of primary and
Performance secondary retail centers.
The weighted average rent (WAR)) is based on estimates from the JLL Offices and Business Space team. It reflects Primary and secondary retail centers are identified based on their turnover levels. Primary Malls are the best
the WAR across a basket of Grade A buildings in the CBD. performing malls with highest levels of turnover. Secondary Malls are the average performing malls with lower
Grade A buildings are defined as high quality office spaces, well located, with good access to infrastructure (metro) levels of turnover.
and amenities including F&B and retail. Average rents represent the top open market net rent expected for a standard in line unit shop of 100 sq m in a
The WAR of Grade A buildings represents the top open-market, net rent (exclusive of service charge and incentives) basket of regional and super regional centers. Given the variation in rentals, we quote percentage change for retail
for a new lease that could be expected for a notional office unit. rents rather than actual figures.
Vacancy rate is based on estimates from the JLL Offices and Business Space team. It reflects the weighted average Vacancy rate is based on estimates from the JLL Retail team. It reflects the average rate across a basket of super
rate across a basket of buildings regional and regional centers.
Residential Hotels
Supply Supply
The current supply of completed residential buildings is based on the National Housing Census 2010, and quarterly The current supply of hotel rooms is based on data from our quarterly surveys, reflecting hotel rooms that have been
surveys of major projects and standalone developments in Riyadh and Jeddah. It is reflecting residential units that handed over for immediate occupation. Our project list includes all graded supply and includes serviced apartments.
have been handed over for immediate occupation. Our definition of residential units includes apartments and
villas. Performance
STR performance data is based on a monthly survey conducted by STR Global on a sample of international
Performance standard midscale and upscale hotels. Average Daily Rates (ADR) and Revenue Per Available Room (Rev Par)
Residential performance is based on two separate baskets, one for rental rates and the other for sale prices of villas are the key performance metrics.
and apartments. The two baskets cover properties in selected locations across the cities.Jeddah Riyadh Al Khobar
Jameel Square, 17th Floor, South Tower, Level 21, Al Khobar
Level 2, Suite 209 Abraj Attawuniya Gate Tower
Tahliya & Andalus King Fahd Road King Fahed Road
Streets Junction
PO Box 13547
PO Box 2091 Riyadh, PO Box 32348
Jeddah, Saudi Arabia 11414 Al Khobar,
Saudi Arabia 8909 - 23326 Saudi Arabia 31952
Tel: +966 11 2180 303
Tel: +966 12 660 2555 Fax: +966 11 2180 308 Tel: +966 1 3 3308 401
Fax: +966 12 669 40 30
With other MEA offices in:
Dubai, Abu Dhabi, Cairo, Johannesburg and Casablanca
For questions and enquiries about the KSA real estate market, please contact:
Dana Salbak Abdullah Al Shabanat Rana Mira
Head of Research, MENA Research Manager, KSA Research Analyst, KSA
dana.salbak@eu.jll.com abdullah.shabanat@eu.jll.com rana.mira@eu.jll.com
www.jll-mena.com
COPYRIGHT © JONES LANG LASALLE IP, INC. 2021.
This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently
unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in
the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-
looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements.
Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on
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