Strong demand for real estate in Saudi Arabia continued to severely outpace supply in 2023, driving up costs of home ownership and office leasing across the kingdom, according to a new report on Tuesday.

In the 12 months to the fourth quarter of 2023, average office rents in Riyadh for both Grades A and B units grew by 13% to 22.2% compared to a year earlier, while occupancy rates stood at 99.4% to 100%, CBRE said. Villa prices went up by as much as 5.5%, while flats posted growth of as much as 10.7% during the same period.

The consultancy firm’s Saudi Arabia Real Estate Market Review for Q4 2023 also noted that during the last three months of the year alone, villa prices rallied in major cities in the kingdom, while residential property transactions surged by 63.7% compared to the same period in 2022.

“On the whole, demand in Saudi Arabia continues to outpace supply across almost all real estate market sectors, hence we have seen relatively strong levels of performance in 2023 despite some headline economic headwinds,” said Taimur Khan, Head of Research – MENA at CBRE.

The level of supply in Saudi’s real estate market will continue to lag demand this year despite the expected delivery of new units, Khan noted, so the market will continue to post robust performance throughout the year.

Office rents

In the 12 months to the fourth quarter of 2023, rents across all office grades in Riyadh went up, with average Prime units posting a 20.7% increase and Grades A and B units rising by 13% and 22.2%, respectively.

The Saudi capital started seeing significant demand towards the end of the year. In the King Abdullah Financial District (KAFD), there was higher demand from national and international tenants, with an estimated 65% of space being leased to date.  

During the last quarter, other markets outside the Saudi capital also saw strong demand, with Grade A office rents in Jeddah rising by 19.7%. Grade B rents were slightly up by 1%, while occupancy rates for both Grade A and Grade B offices in Jeddah went up as well to reach 92.5% and 82.1%, respectively.

In the Eastern Province, Dammam and Khobar saw Grade A office rents rising by 7.4% and 7.2%, respectively while Grade A units in Dammam and Khobar were also nearly full at 84.2% and 83.6% occupancy, respectively.

Residential sector

Within the villa segment, Riyadh, Jeddah, Dammam and Khobar posted average price increases of 5.5%, 4.8%, 0.3% and 1.1%, respectively in the 12 months to Q4 2023.

Over the same period, average apartment prices in Riyadh, Dammam and Khobar rose by 10.7%, 1.8% and 2%, respectively. However, in Jeddah, prices for flats dipped by 1.9%.

(Writing by Cleofe Maceda; editing by Seban Scaria)