Infrastructure and redevelopment of city centre key to realizing Jeddah's 20 year plan

Partnership between government and private sector creates opportunities to attract regional and international investors.

09 June 2009: Jones Lang LaSalle has issued its latest Jeddah City Profile examining the challenges and opportunities facing Saudi Arabia's gateway city as it launches a 20 year vision to redevelop the existing city centre and implement major new infrastructure investment.   

Jones Lang LaSalle, the world's leading real estate investment and advisory firm, with offices in Jeddah and Riyadh, has combined its global expertise and local presence to research the real estate market in Saudi Arabia. Jones Lang LaSalle is publishing its findings in the form of the Jeddah City Profile which is a key resource for those interested and involved in the mega-projects that are intended to transform the face of the Kingdom over the next twenty years.

"Saudi Arabia is investing much of its wealth to ensure that the nation has the capacity to house and employ its young and rapidly expanding population," said John Harris, Head of KSA operations for Jones Lang LaSalle "In Jeddah alone, the ambition and sheer scale of the developments underway are breathtaking in their concept and will make the Kingdom's gateway city one of the most dynamic real estate markets over the next two decades." 

According to Jones Lang LaSalle's recent MENA Investor Sentiment Survey, it appears that opportunities for regional investors into Jeddah are not being promoted as aggressively as other regional markets. John Harris went on to say: "Our assessment is that the consensus of opinion among investors is lagging behind events on the ground and, as our report reveals, Jeddah is in the process of implementing major regeneration initiatives and aggressively investing to upgrade its urban infrastructure which will in turn see a renewed interest among regional and international investors." 

The Jeddah City Profile identifies six of the key regeneration initiatives and outlines their objectives. At the heart of these initiatives are the Jeddah Development and Urban Regeneration Company (JDURC) and the City Centre Development Corporation (CCDC). Two of the biggest initiatives currently being undertaken by JDURC are redevelopment of the Khozama and Ruwais areas, while the CCDC is responsible for the Jeddah Central Development Projects to rehabilitate the central and historic districts.

The City Profile points out that these initiatives are aligned with a broader strategy of improving the city's transportation infrastructure including expansion of the capacity of Jeddah Islamic Port, new overpasses to free up congestion of the roads, a light rail system linking the city centre to the airport, a high-speed Makkah-Madinah railway, and a western terminus for the landbridge project enabling logistics connection across the country from Jeddah to Riyadh and Dammam.

One of the most visible infrastructure investments will be the redevelopment of Jeddah's international airport to create capacity for up to 25 million passengers a year. The airport authority (GACA) is working to deliver this project by 2012 or 2013. A key component of GACA's vision is the development of a major airport city including business parks, retail, residential, hospitality properties, and recreational areas.                                                 

In review of recent economic trends, the Profile reports that cuts in oil output and subdued no-oil growth means that Saudi Arabia's economy is set to contract one percent in 2009. However, while public lending remains constrained, figures from MEED Projects indicate that public investment growth is compensating for the slowdown in private investment. The total value of new public sector contracts awarded across Saudi Arabia between October 2008 and April 2009 amounted to USD 137 billion, eclipsing the USD 62 billion worth of projects cancelled or put on hold during the same period.

Reporting on the status of the office market, the report observes that unlike Riyadh, Jeddah does not have a well defined central business district and that the traditional central area of Balad is significantly lacking in modern office space. However, noting that demand has been moderate so far in 2009, the report states that following a decade without any significant additional office development, more than 300,000 sq m is scheduled for completion before the end of 2010. It also notes that the successful buildings will be those that offer better than average parking, convenient access and higher quality facilities than so far been experienced in Jeddah.

In the residential market, Jeddah has a current stock of around 807,000 housing units, with an additional 30,000 units announced as being in the pipeline for delivery over the next five years. However, completions are not keeping up with announcements and the Profile estimates that only 5,000 units are currently under construction by private sector developers, of which 60 percent are apartments.

Concerning the current state of the retail market, the report considers that the amount of new retail space added in 2008 has resulted in oversupply. The inventory currently stands at around one million sq m and if the announced projects proceed this will increase to 1.6m by 2014.

Of all the real estate sectors in Jeddah, the City Profile considers the hospitality market to be the least affected by the economic slowdown. Jeddah is the gateway for nearly four million Muslim visitors who travel to Makkah and Madinah every year, while Jeddah's seaside location makes it a prime leisure destination for Saudi nationals. Demand continues to rise and in the fourth quarter of 2008, initial contracts were signed for the first phase of an ambitious USD 38 billion tourism master plan for the development of 19 resort destinations along the Red Sea coastline.

Looking at the future of the Jeddah real estate market, Abdollah Al-Faadhel, Business Development Director at Jones Lang Lasalle said: "Public and private interests are now responding to the challenges facing Jeddah from the force of centralization to Riyadh, the emergence of SAGIA's new economic cities and the attractions of other GCC cities. Driven by these factors, together with vision, ambition and high levels of public investment, Jeddah will be one of the world's most interesting cities for participants in the real estate market over the next twenty years."

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About Jones Lang LaSalle MENA
Across the Middle East and North Africa, Jones Lang LaSalle is a leading player in the real estate market and hospitality services market. The firm has worked in over 25 Middle Eastern and North African countries and has advised clients on more than USD 200 billion worth of real estate, hotel and hospitality developments. Jones Lang LaSalle is recognised as having leading real estate and hospitality expertise with a leadership team that has held senior positions with some of the largest real estate developers, hospitality companies and corporate groups both in the Middle East and internationally.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenues of USD 2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. LaSalle Investment Management, the company's investment management business, is one of the world's largest and most diverse in real estate with more than USD 41 billion of assets under management.

For further information, please visit our Website, www.joneslanglasalle-mena.com
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PO Box 9629, Al Ehasa Street
Riyadh 11423, Saudi Arabia

Manash Bhuyan / John Harris
+971 50 8419631 / +966 1 4728309
ahmed.alhassani@traccs.net/john.harris@jll.com

© Press Release 2009