New relaxed regulations and moves to attract multinational companies are likely to positively impact demand in the medium-to-long term for commercial office space in Saudi Arabia, property consultants JLL said in a new report Wednesday.
Earlier this year, the Royal Commission for Riyadh announced a target to attract up to 500 multination companies to set up their regional headquarters in Riyadh over the next 10 years. In addition, the government has announced a new sponsorship system, which will allow expatriate workers to have job mobility and the freedom to enter and exit the Kingdom without the need for an employer’s permission.
“Going forward, these initiatives are bound to increase foreign talent, accelerate economic recovery and create more opportunities, setting the Kingdom on a sustainable growth trajectory. We expect to see it positively drive demand in the office sector in the long run,” said Dana Salbak, Head of Research at JLL MENA.
During the first quarter of 2021, two corporate office projects in Riyadh were completed, increasing the total stock by around 50,000 sq m to 4.4 million sq m of GLA. Meanwhile, Jeddah saw two smaller, new deliveries keeping the stock stable at 1.1 million sq m.
Within the residential sector too strong government support led to increased demand in the first quarter of the year, JLL said. Residential new mortgage loans for individuals added 33,000 contracts in January 2021. The total value of mortgages raised to 16.4 billion riyals ($4.37 billion), according to the Saudi Arabia Monetary Agency (SAMA).
From a supply perspective, the first quarter recorded an increase in construction activity with around 7,700 and 2,000 units handed over in Riyadh and Jeddah, respectively.
Meanwhile, retail rents in Riyadh remained under downward pressure, as average rents for super-regional malls registered annual declines of 9 percent in Q1 2021. Similarly, retail rents in Jeddah saw an annual decline of 3 percent for super-regional retail centres and a 1 percent dip for regional centres.
In the hotel sector, occupancy levels registered 51 percent in the year to (YT) February 2021, while Average Daily Rates (ADR) declined to reach $151 in Riyadh while Jeddah saw occupancy rates decrease to register 38 percent. While ADR remained higher than those in Riyadh, revenue per available room (RevPar) in Jeddah registered substantial declines to reach $70 in the YT February 2021.
Hotels in the GCC have borne the brunt of the travel restrictions imposed by the coronavirus pandemic. In Saudi Arabia, tourism, including religious travel, received a setback even as the kingdom implemented measures to push tourism as a way of diversifying into new revenue streams.
(Writing by Brinda Darasha; editing by Seban Scaria)
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