Demand is concentrated on key buildings such as Kingdom Tower, Economic Gateway and Granada Business Oasis which enjoy over 90% occupancy. <Vacancy rates remained unchanged across the city, indicating that demand for office space is keeping pace with the new supply that entered the market during the second half of 2014 and the first half of 2015. Class A and B office rents have remained stable throughout the period and currently stand at SAR 1,300 and 900 per square meter per annum, respectively. <According to knight frank's office market update, the potential surplus following the release of successive phases of the King Abdullah Financial District (KAFD) and the delivery of the Information Technology Park (TCC) has not been realized due in part to the historical shortage of quality Grade A office space and the phasing of the KAFD. As a result of these government-backed schemes, the capital will see 1.2 million square meters of gross leasable area added to the market in the next two years.
In Jeddah, the office sector has also stabilized, and while there were limited new office deliveries in the first half of 2015, vacancy rates were unchanged compared to the previous year. This is largely because demand during the period was sufficient to offset the rise in new supply. As a result, Grade A (SAR 1,200 per square meter per annum) and Grade B (SAR 700 per square meter per annum) office rents in the first half of 2015. Demand is expected to remain stable amid high supply in the Eastern Province, and we will see a slight increase in vacancy rates by the end of this year, but with landlords reluctant to negotiate despite changing supply and demand dynamics. Class A and B office rents are expected to remain stable in 2015 (SAR 1,050 and SAR 700 per square meter per annum, respectively).
