SPARK to fuel demand for commercial real estate, says JLL

The upcoming King Salman Energy Park (SPARK), one of the largest investments in the Eastern Province of Saudi Arabia, is set to boost demand for commercial properties in the Dammam Metropolitan Area (DMA), consultancy firm JLL said in a new report.

In line with Saudi Vision 2030, SPARK is being undertaken by Saudi Aramco, the world's largest oil producer, and will serve as an economic catalyst, creating thousands of jobs in a global industrial hub for energy-related manufacturing services, boosting the industrial and office market in the DMA area, it added.

“The plans to diversify the Saudi economy away from the oil and gas sector presented a less positive outlook for oil-rich Dammam compared to other cities across Saudi. However, this new energy-hub demonstrates major investments being made within the energy sector itself to fuel economic growth,” said Craig Plumb, Head of Research, MENA, JLL.

“SPARK presents a more positive outlook for the DMA region as development of the park is expected to enhance the region’s office market as tenants come on board,” he added.

As part of the National Transformation Program, the energy park is estimated to contribute SAR 22.5 billion ($6 billion) to the national GDP annually once developed by 2035. The new hub will boost the downstream petrochemicals sector and will increase the contribution of local content across different industrial sectors.

Saudi Aramco recently announced awarding 10-year purchase agreements to 16 pressure vessels manufactures, which will increase demand for office space in the DMA in the coming years, the report said.

Meanwhile, the office market continued to soften in the first half of 2018, as rents fell 2 percent year-on-year to reach SAR 997 square meters, down from SAR 1014 square meters in H1 2017.

However, office demand is expected to increase in the medium to long-term, in line with the target for Saudi Aramco to source 70 percent of its inputs from local companies.

Across other segments, the residential stock continued to grow, though at a slightly slower rate than in previous years. Nearly 3,000 units were completed in H1 2018, with a similar number expected to come into the market in the second half of this year. Total residential stock currently stands at 348,000 units across Dammam, Khobar and Dhahran.

The retail sector recorded no new completions in H1 2018, with the total stock remaining around 1 million square meters.

Meanwhile, the hospitality sector remained active in the first six months of the year, with five new hotels and two serviced-apartment projects entering the market, JLL added.