Saudi Arabia is witnessing a remarkable transformation in the real estate market, as urban developments and economic diversification initiatives combine to boost the growth of the real estate sector. As tourist numbers increase and the performance indicators of various sectors improve, promising investment opportunities are emerging for companies and investors.

JLL, a real estate investment and advisory firm, has released a new report that sheds light on the dynamics of the real estate market in Saudi Arabia. The report noted that rapid urbanization and infrastructure development are opening up new prospects for development projects, supported by the booming tourism sector and ongoing economic diversification initiatives under Vision 2030.

The report emphasized that the outlook for Saudi Arabia's real estate market is favorable. The report stressed that the long-term outlook for the real estate market remains positive, thanks to government initiatives such as the "Sakani” program and the Real Estate Development Fund, which contribute to increasing homeownership rates for citizens.

The residential sector is undergoing a clear transformation

The residential market in Riyadh and Jeddah continued to show strong growth during the third quarter of the year, with total supply in Riyadh increasing to 1.46 million units, with the addition of 4 thousand new units, while Jeddah delivered 8 thousand units, bringing the total to 899 thousand units. The report expects an additional 11k units to be delivered in the two cities before the end of the year. <Sales prices increased by 12% in Riyadh and 6% in Jeddah, while rental prices increased by 10% and 8% respectively. Apartments saw the highest price increase of 17% in Riyadh and 6% in Jeddah, making them a favorite choice for young people and first-time buyers.

Significant growth in office space

Rents for Class A office space in Riyadh increased by 20.8% to SAR 2,131 per square meter, with vacancy rates falling to 1.6%, an all-time low. In Jeddah, office space rents increased by 11.6% to SAR 1,338 per square meter, with the vacancy rate falling to 3.7%.

Office space rents increased by 11.6% to SAR 1,338 per square meter, with the vacancy rate falling to 3.7%. The report noted that demand for high-quality office space continues to drive developers to adjust their offerings to meet tenants" needs, especially as attention turns to the northern areas of Riyadh.

Riyadh's northern areas.

Hospitality sector makes leaps and bounds

The Kingdom's hospitality sector has witnessed remarkable growth driven by tourism diversification efforts. According to the report, the number of international tourists jumped by 6,56% during the first seven months of 2024, reaching 17.5 million visitors, an increase of 10% compared to last year. Initiatives such as easing visa procedures, diversifying entertainment offerings and hosting major sporting events have contributed to the Kingdom's position as a global tourist destination.

In Riyadh, the average price of international tourists jumped by 6,56%. <In Riyadh, average daily rates increased by 19%, while revenue per available room increased by 17.1%. In Jeddah, occupancy rates increased by 1.4 percentage points despite a decrease in room revenue by 10.3%. The number of hotel rooms in Riyadh stood at 22,379 and in Jeddah at 16,538, with plans to add 2,200 rooms in Riyadh and 550 rooms in Jeddah by the end of the year.

Retail Outlets: A renewed shopping experience

The retail outlets sector in Riyadh and Jeddah showed mixed performance. While Riyadh's retail outlet supply stabilized at 3.48 million square meters, Jeddah saw rents for major regional malls rise by 4.2% and rents for regional centers decline by 4.5%.

Riyadh's retail outlets sector showed a mixed performance. <The report emphasized that retailers are increasingly turning to innovative shopping experiences that include modern store designs, interactive screens, and entertainment events. With 183,000 square meters of new retail space entering the market by the end of the year, the report predicts intense competition to attract customers.

Promising investment opportunities

<Saud Al-Sulaimani, Director of JLL's Saudi Arabia office, stated that the Kingdom is witnessing unprecedented growth in multiple sectors. He noted that rising tourist numbers, growth in the hospitality sector, and growing demand for residential real estate provide a dynamic environment that creates tremendous opportunities for investors and businesses alike. He stressed that the Kingdom's commitment to diversify its economy will remain a key factor in shaping the future of the real estate market.

The most important factors for the growth of the Saudi real estate market

6 increase in international tourism supports the hospitality sector

International tourist arrivals to rise to 17.5 million visitors in the first seven months of 2024.

Tourist visa initiatives and major events are driving growth.

12 % growth in sale prices of residential units in Riyadh

Riyadh sees 4k housing units added in Q3.

Riyadh is expected to deliver 11k units in the third quarter. An additional 11,000 units are expected to be delivered in Riyadh and Jeddah by the end of the year.

20.8 % jump in office rents in Riyadh

Vacancy rates fall to 1.6% in office space.

A shift towards the north of the capital boosts demand for high-quality offices.

Riyadh office rents jump to 1.6%

183 thousand square meters of new retail outlets by the end of 2024

Growing appetite to optimize the shopping experience by integrating technology and events.

Rising appetite to optimize the shopping experience by integrating technology and events.

Retail rents stabilize despite expansion.

Rentals stabilize despite expansion.

83 % of Jeddah transactions focus on residential apartments

Apartments top buyers" choices with prices rising by 17% in Riyadh.

A notable shift towards smaller, more efficient units.