In a report by Jones Lang LaSalle
June 20, 2010: Jones Lang LaSalle, the leading global real estate advisory and management services firm and the largest firm of its kind in the Middle East and North Africa, expects the residential real estate market in Riyadh to see a recovery with prices set to increase by 5-10% per year over the next two years.
John Harris, head of Jones Lang LaSalle in Saudi Arabia, said: “As Riyadh's population increases and housing indicators change, continued job growth and improved affordability will be the challenge to turn this potential into real demand for residential units.”
“The housing market is seeing moderate price and land value increases due to increased confidence and a return to economic growth. Small builders continue to lead the housing sector but we expect to see an increase in large development projects. We are also keeping an eye on the expatriate condominium sector as developers and investors in this sector are starting to become active again after almost ten years without any new supply.”
Office market :
The office market in Riyadh is seeing an increase in supply as 50,000 square meters of new office space was completed in 2010 and the Public Pension Institutions have started construction on a number of new projects. One million square meters of new office space is expected to enter the market over the next five years.
The large number of buildings that have entered the market has resulted in plenty of vacant space, giving tenants increased leverage against landlords, and larger tenants in particular are able to negotiate lower rents.
John Harris said: “The office market should remain relatively stable between 2010 and 2011, but that will be when the King Abdullah Financial Center, Olaya Towers and Granada Business Park are completed.”
Retail market :
The retail sector is expected to see an improvement in sales and rentals until the end of the year. With a large number of the city's population being young, food and beverage outlets and entertainment venues are key drivers of demand for suburban shopping centers. The current available retail space in Riyadh is estimated at 2.3 million square meters and is expected to increase to 2.9 million square meters by 2014 to serve new suburbs. This increase in supply is expected to lead to a decline in exhibition rents.
Investor confidence is improving, and growth in the sale of retail space has resumed. The value of sales has been increasing since mid-2009 and reached 22% in April 2010 compared to the same period last year. However, competition in leasing remains, given the limited capital available for business networks to expand their businesses and some retail organizations restructuring their businesses.
Hospitality market:
The hospitality market remained relatively stable in the first half of 2010. Two international hotels opened their doors early in the year (Hilton Garden Inn and Coral Hotel in Sulaimaniya), and Riyadh is expected to see a significant increase in the number of international hotels over the next four years. In addition, there are now more than eight properties under construction for various serviced apartment chains in Riyadh.
There are about 10,000 hotel rooms in the Riyadh region, equivalent to 8.7% of the total number of hotel rooms in the Kingdom. The shortage of expatriate accommodation and the increase in local and international business in the city are expected to continue the good performance of the hospitality sector in 2010 and 2011.
Harris said: “Business and government travelers are driving the luxury hotel sector in Riyadh. ”As government budgets increase and more foreign companies see the Kingdom as a long-term growth opportunity, demand from these sectors will continue to drive hotel occupancy."
Harris said.
