The Saudi real estate market continues its upward growth thanks to mega-projects and strategic initiatives aimed at developing infrastructure and boosting economic activity. According to a recent report by JLL, a firm specializing in real estate consulting and research, the residential and hospitality sectors posted strong performance in the first half of 2024, driven by government efforts to promote homeownership and streamline procedures for obtaining tourist visas, as well as the revitalization of entertainment offerings and sports activities.
Residential Real Estate Sector: Strong Performance and Continued Expansion
The JLL report noted that Saudi Arabia’s residential real estate sector got off to a strong start in the first half of 2024, with 27,500 new residential units entering the markets in Riyadh and Jeddah. Of these, 16,200 units were in Riyadh and 11,300 units were in Jeddah, bringing the total housing inventory in Riyadh to 1.46 million units and in Jeddah to 891,000 units.
The report projected that another 16,000 residential units would be added in both Riyadh and Jeddah during the second half of 2024. In this context, residential real estate sales prices in Riyadh rose by 10% year-over-year, while average rents increased by 9%, reflecting strong and growing demand. Jeddah, meanwhile, recorded lower growth rates, with sales prices rising by 5% and rents by 4% during the same period.
Despite rising construction costs and the complexities of megaprojects, the residential real estate market in Saudi Arabia is showing strong resilience, benefiting from significant government support and initiatives that facilitate access to financing and homeownership. The report noted the sector’s trend toward further expansion, particularly in new areas such as Al-Khobar, which is experiencing increasing real estate activity, where sales prices remained stable while rents rose by 4% annually.
Hospitality Sector: Remarkable Growth Driven by Tourism Expansion
On another note, the report indicated that the hospitality sector in Saudi Arabia is experiencing unprecedented growth, as the Kingdom prepares to welcome 150 million visitors by 2030. Average hotel occupancy rose by one percentage point in the first half of 2024, while the average daily rate increased by 7%, and revenue per available room rose by 8%.
The holy cities of Mecca and Medina recorded notable increases in revenue per available room, by 4% and 15%, respectively. In Riyadh, the average daily rate rose by 25% due to an increase in corporate visits and the concentration of corporate events in the capital.
JLL projected that the hospitality sector will continue to grow, supported by mega-projects and massive tourism investments estimated at approximately $800 billion over the next decade. In addition, the Kingdom will host a series of major global events such as the 2027 Asian Cup, the 2029 Asian Winter Games, Expo 2030, and the 2034 World Cup. The report noted that the recently adopted hotel services rating system will help improve service quality and address short-term challenges, thereby enhancing long-term performance.
Office Sector: Continued Competitiveness and Rising Demand
The office space sector in Saudi Arabia continues to be highly competitive, benefiting from growing demand from local and international companies. A total of 52,000 square meters of new office space was added in Riyadh during the first half of 2024, bringing the total supply to 5.2 million square meters. Meanwhile, Jeddah’s inventory remained steady at 1.21 million square meters, and 249,000 square meters of office space is expected to be added in Riyadh and 48,000 square meters in Jeddah during the second half of the year.
The report noted that demand for high-quality corporate office space has risen significantly, particularly in the northern part of Riyadh, which is characterized by easy access, less traffic congestion, and the availability of premium office space. As a result, Class A rents in Riyadh rose by 19% annually to reach 2,090 riyals per square meter. Jeddah also saw an annual increase in Class A rents of 11%, reaching 1,335 riyals per square meter.
The report also noted that government agencies in the Dammam region are driving demand for office space, leading to a 10% increase in average rents through the second quarter of 2024. It noted that companies operating in Saudi Arabia are benefiting from a supportive investment environment and government incentives, which are boosting demand for new office space and encouraging the expansion and upgrading of existing offices.
Promising Future Outlook for the Saudi Real Estate Market
The real estate sector in Saudi Arabia is expected to continue growing over the coming years, with Vision 2030 projects playing a pivotal role in supporting this sector. With massive investments in infrastructure and urban expansion, the Kingdom will witness unprecedented growth in the residential and hospitality sectors, along with increasing demand for office space and commercial facilities.
JLL noted that economic reforms and government policies aimed at promoting economic diversification will enhance the attractiveness of the Saudi market for real estate investment, creating new opportunities for local and international investors. Furthermore, continued growth in the tourism and entertainment sectors, as well as mega-projects such as NEOM and Al Qiddiya, is helping to support market stability and drive further prosperity.
In conclusion, the real estate market in Saudi Arabia remains one of the most dynamic in the region and is poised to continue its growth trajectory, supported by strategic initiatives and massive government investments, thereby reinforcing its position as a leading global investment destination.
