Despite economic challenges, Riyadh's office market is doing well in early 2024. This is as per a report by Savills. In particular, Grade A offices in Riyadh are set to stay in high demand this year. Initiatives like the Saudi Vision 2030 are driving this growth. This vision aims to attract more foreign investment and diversify income sources.
ATTRACTING FOREIGN INVESTMENT
More and more foreign companies are choosing Riyadh. Savills has received 74% of its inquiries from abroad. Among them, 37% are from US firms.
A KEY REGIONAL HUB WITH STRONG LEASING ACTIVITY
Riyadh offers a 30-year tax relief for regional headquarters. This, along with its growing market and promising prospects, attracts international companies. It is playing a key role in Riyadh's positioning as a regional hub.
On top of this, Riyadh's leasing activity in the first quarter of 2024 was strong. Legal services, engineering, manufacturing, and information technology sectors led the way.
LIMITED PRIME OFFICE SPACE IN RIYADH
Riyadh is facing a shortage of prime office space, with a Grade A occupancy rate of 98%. Rents have risen by 5% quarterly and 20% annually.
HIGH-DEMAND AREAS FOR OFFICE SPACE IN RIYADH
At present, there's a strong demand for business parks and the King Abdullah Financial District. In fact, 75% of transactions involve moving to these areas. To meet this demand, Savills expects 420,000 square meters of new Grade A office space to be available by the end of 2024.
Despite this strong demand, there was a significant decrease in office rent transactions in the first quarter of 2024. The Savills report highlighted a 27% drop in office rent transactions in Q1 compared to the same time last year. This is at large due to limited availability.
FURTHER INSIGHTS FROM SAVILLS
Amjad Saif, Head of Transactional Services at Savills in KSA, noticed fewer office rent transactions in Q1. This was because there wasn't enough space available. Ramzi Darwish, Head of Saudi Arabia at Savills Middle East, came to another observation. He pointed out that Riyadh saw a rise in corporate interest in Q1 too. Yet, over 180 foreign companies chose to set up their regional headquarters there. This surpassed the initial target of 160.
GROWING CONFIDENCE IN RIYADH’S OFFICE MARKET
Growing confidence, coupled with the ongoing development of new office space, suggests a bright future for Riyadh's office market. This is at large fueled by Saudi Arabia's strategic economic diversification plan. So, as the city continues to attract foreign investment and diversify its economy, demand is likely to remain strong.
