Riyadh – Real estate market performance in Saudi Arabia has continued to fragment both on an asset and geographical level over the course of 2021, according to research by CBRE. As restrictions are lifted and with a host of events due to take place, the Saudi hospitality sector is one of the key segments poised for a significant rebound.
Looking at Saudi Arabia’s office sector figures, visitation to the workplace has now surpassed its pre-pandemic baseline by 2.9%, with the majority of occupier activity continuing to be centred towards Riyadh. As a result, we have seen average rents in Riyadh’s Grade A segment increase by 8.1% in the year to September 2021, whereas Grade B rents fell marginally by 0.7%. In Jeddah, institutional occupier activity remains limited, and tends to be skewed either towards smaller fitted office or serviced office solutions. In the Eastern Province’s office market, demand continues to be subdued, with Dammam’s average Grade A rents falling by 3.4% and Khobar’s average Grade A rents falling by 2.7%. In 2021, we forecast that office supply in Riyadh, Jeddah and the Eastern Province will increase by 8.1%, 1.5% and 7.5% respectively.
Residential transaction volumes in Saudi Arabia fell by 21.1% in the year to Q3 2021. As a result, we have also seen the total number of mortgage contracts decrease by 6.1% over the same period. Single-family residences, apartments and land accounted for 77.6%, 18.4% and 4.0% of total lending, respectively. In Riyadh, total transaction volumes increased by 9.7% in the 12 months to Q3 2021, and average apartment and villa prices increased by 14.9% and 8.5% respectively. In Jeddah, residential transactional activity fell by 19.0%, where the third quarter saw a marked downturn in activity levels. Jeddah’s apartment and villa prices yet increased by 11.6% and 6.9% in the year to Q3 2021. In the Dammam Metropolitan area, residential transactions fell by 20.4% in the 12 months to Q3 2021. In Dammam and Khobar, we have seen apartment and villa prices increase by 3.1% and 0.1% and 6.7% and 2.1% respectively. In 2021, new supply is expected to increase total supply in Riyadh, Jeddah and the Dammam Metropolitan area by 0.7%, 1.5% and 3.9% respectively.
Looking at Saudi Arabia’s hospitality sector, the average occupancy rate in the Kingdom fell by 3.4 percentage points year-on-year in the year to date to September 2021. This decline in occupancy has been underpinned by declining occupancy levels in Makkah and Medina, which saw occupancy fall by 11.0 and 1.1 percentage points. More so, year-on-year in the year to date to September 2021, Saudi Arabia’s Average Daily Rate (ADR) increased by 9.9%. As a result, we have seen Revenue per Available Room (RevPAR) increase by 1.0% over the same period. Increasing levels of leisure and corporate tourism have driven performance in key markets such as Jeddah, Khobar and Riyadh, where RevPARs year-on-year in the year to date to September 2021, increased by 54.9%, 13.8% and 1.5% respectively. In the Holy Cities of Makkah and Medina, restrictions during the reporting period have meant that RevPARs decreased by 5.2% and 11.0% respectively.
Taimur Khan, Head of Research – MENA at CBRE in Dubai, comments:
“Looking ahead, given that the vast majority of COVID-related occupancy restrictions and travel bans were removed in mid-October, we expect to see significant improvements over the remainder of the year across all key performance indicators in Saudi Arabia. Major events such as the Saudi Arabian Grand Prix in Jeddah and the start of an extended Riyadh Season are expected to underpin both local and international leisure demand. Furthermore, the removal of the UAE from the red list will lead to a significant uplift in corporate tourism levels.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2020 revenue). The company has more than 100,000 employees serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
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