• The retail sector (including hotels and accommodation) contributed nearly a quarter (23%) of the growth of the Kingdom’s non-oil GDP

Riyadh: Average rental rates across Riyadh’s retail market have increased marginally by 3% to SAR 2,725 psm for both regional and super regional malls in the last 12 months, while occupancy rates across the retail market increased by 5 percentage points to 90%, according to global property consultancy Knight Frank’s Summer 2024 Saudi Arabia Retail Market Overview. (add link)

The total existing retail supply in Riyadh stands at 3.6 million sqm, with around 27,050 sqm of retail space entering the market in Q1 2024. Knight Frank forecasts that the capital’s retail stock will grow by 28% to 4.6 million sqm by 2026.

In contrast to the capital, Jeddah and the Dammam Metropolitan Area (DMA) have experienced subdued retail market growth in the last 12 months with occupancy rates dropping by 1 percentage point in both cities, to 84% and 89%, respectively, says Knight Frank. Lease rates have responded, with average rents in Jeddah dropping by 7% to SAR 2,465 psm, while DMA regional and super regional malls rental rates have, on average, witnessed a decline of 1.3% to SAR 2,275 psm.

Faisal Durrani, Partner – Head of Research, MENA, explained: “The rapidity of the evolution of the retail and food and beverage landscape in Sadi Arabia cannot be overstated and Riyadh sits at the heart of this phenomenal growth, which is also powering the Kingdom’s economic diversification efforts. We are in the midst of a significant liberalisation of Saudi Arabia's entertainment sector as well, resulting in the development of new cinemas, concert halls, theme parks, and sports complexes, facilities. This transformation is reshaping the retail landscape while also making a substantial contribution to non-oil GDP growth.

“Looking ahead, a further 100,000 sqm of space is likely to completed in the capital this year, which while welcome news for consumers, shines a light on the importance for mall operators, developers and retailers to double-down on experiential retail offerings in order to stay relevant and appealing.”

Data-driven future success

Knight Frank highlights the importance of data to ensure the longevity of success of new retail market entrants.

Jonathan Pagett, Partner – Retail Advisory, KSA, commented: ‘What we are witnessing today in Saudi’s retail scene is a newly defined retail destinations and recent consumer demands evolving around ‘feels’ where purchases have become a by-product of shopping mall visitation with consumers continue to seek unique immersive experiences. With a particular focus on food and beverage and lifestyle retail developments, Saudi Arabia is undergoing an exciting transformation as it pivots towards steady adaptation to evolving consumer preferences and market dynamics.

Therefore, we believe developers should aim to avoid the ‘build it and they will come’ mentality and instead focus on ‘top down’ approach to define market share and a ‘bottom up’ strategy to fully understand consumer data and what is the optimal positioning to optimise footfall, conversion, net operating income and capital value’. 

Making well-informed decisions about significant capital investment plans requires a thorough analysis of consumer trends, customer journeys, and evolving spending patterns, Knight Frank says.

Economic Diversification

Knight Frank also points to the e-commerce market in Saudi Arabia, which expanded by 28% to SAR 157 billion (US$ 41.8bn) in 2023.  This growth is being fuelled by an increase in internet penetration and smartphone usage, coupled with government support for digital retail infrastructure.

 Amar Hussain - Associate Partner, Research, ME, concluded: "The rapid adoption of digital payment methods and e-commerce platforms is reshaping the retail sector in Saudi Arabia. Retailers are increasingly investing in omnichannel strategies to integrate their online and offline operations, ensuring a seamless consumer experience. This digital transformation is essential for meeting the evolving preferences of consumers."


About Knight Frank:

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, the Knight Frank network has 487 offices across 53 territories and more than 20,000 people The Group advises clients ranging from individual owners and buyers to major developers, investors, and corporate tenants. For further information about the Firm, please visit www.knightfrank.com.

In the MENA region, we have strategically positioned offices in key countries such as the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, and Egypt. For the past 13 years, we have been offering integrated residential and commercial real estate services, including transactional support, consultancy, and management.

Understanding the unique intricacies of local markets is at the core of what we do, we blend this understanding with our global resources to provide you with tailored solutions that meet your specific needs. At Knight Frank, excellence, innovation, and a genuine focus on our clients drive everything we do. We are not just consultants; we are trusted partners in property ready to support you on your real estate journey, no matter the scale of your endeavour.

For all Media and PR inquiries, please contact:
Roksar Kamal, PR & Communications Manager

Let's connect socially - find us on LinkedIn, Instagram, and Twitter. For more information and to explore how we can be your partners in property, please visit our website at https://www.knightfrank.com.sa