Saudi Arabia's Real Estate Boom: Strong Demand Across Sectors Revealed In New Report

Saudi Arabia's real estate market is experiencing robust growth across various sectors, buoyed by strategic economic diversification efforts and a strong investment environment. From the surging demand for office and residential spaces to the expansion of the industrial, retail, and hospitality sectors, the Kingdom is on a fast track.

The Saudi Arabia Real Estate Market Review for Q4 2024, released by CBRE Middle East, reveals significant growth and demand across various sectors, driven by the Kingdom's thriving non-oil economy and strategic diversification efforts under Vision 2030.

The report highlights the strong demand for office space in Riyadh, with occupancy rates nearing capacity and rental rates rising by 18%. This intense demand, a result of the Kingdom's economic strategies, is also mirrored in Jeddah and Dammam, though to a lesser extent, with rental growth recorded at 10% and 12% respectively.

In the residential sector, a booming economy, expanding population, and escalating demand for housing are propelling prices and rental rates upward. The value of new residential mortgages surged by 17% year-on-year in 2024, indicating a robust market.

Riyadh, in particular, saw property values climb by over 6% in the past year, with expectations for further increases as new, high-quality units are introduced. Prices in the villa market in Riyadh are nearing SAR6,000 per square meter, while in Jeddah, apartment and villa values hover around SAR4,000 and SAR5,700 per square meter, respectively.

The Kingdom's industrial and logistics sector is also witnessing significant growth, with MODON spearheading the expansion of industrial cities and the construction of ready-made factories to bolster investment. This initiative, part of Saudi Arabia's food security strategy and efforts to enhance domestic production, will see 247 factories built, including a dedicated food cluster in Jeddah.

As the infrastructure upgrades continue, including improvements to roads, water systems, and electricity services, industrial rents are on the rise, with Riyadh experiencing rates of approximately SAR 215 per square meter per annum.

The retail market in Saudi Arabia has shown a positive trajectory, with POS data indicating a 9% growth year-on-year, driven in part by the F&B sector. Despite a slowdown in growth compared to the previous year, the retail landscape is poised for transformation with the completion of several major shopping centers.

The hospitality sector, too, is thriving, with the Kingdom welcoming close to 30 million tourists in 2024, contributing to nearly 5% of the GDP. This growth is in line with Saudi's ambitious tourism targets, including attracting 70 million visitors annually by the end of 2030, supported by strategic investments and the hosting of global events like the 2034 FIFA World Cup.

Matthew Green, Head of Research MENA at CBRE, underscores the positive outlook for the Saudi real estate market, attributing its success to the strong non-oil sector and the effective RHQ initiative, which has led to the establishment of new regional headquarters in the Kingdom. This growth is not only evident in the commercial market but across the broader economy as well.