JLL expects 32,000 new residential units in Riyadh, Jeddah in H2 2024

Riyadh city

Saudi Arabia’s real estate market maintained its upward trajectory due to strategic initiatives and significant investments in infrastructure and megaprojects. This has enhanced the market’s resilience and adaptability to challenges, said consultancy firm JLL in its latest KSA Real Estate Market Dynamics Report.

The report revealed strong performance in the Saudi residential and hospitality sectors during the first half of 2024, driven by government efforts to boost homeownership, simplify tourist visa procedures, expand entertainment offerings, and support sports activities.

Residential Sector:

The Saudi residential sector saw a strong start in 2024, with 27,500 new units added in Riyadh (16,200) and Jeddah (11,300), raising the total stock to 1.46 million in Riyadh and 891,000 in Jeddah.

An additional 16,000 units are expected in each of the two cities during the second half of the year.

Riyadh’s residential sale prices posted a noticeable hike of 10% year-on-year (YoY) in the first half of 2024, with rents increasing by 9% YoY.

Jeddah saw more modest increases, with sale prices and rents up 5% and 4%, respectively, during the six-month period.

Despite challenges such as rising construction costs and complexities of megaprojects, the Saudi residential sector is on a positive trajectory toward further expansion and development.

The Dammam Metropolitan Area (DMA) is shifting towards inland locations, with Khobar seeing most activity. Average sale prices have remained stable, while rents witnessed a marginal YoY rise of 4%.

Hotels & Hospitality Sector:

As Saudi Arabia gears up to attract 150 million visitors by 2030, the hospitality sector saw unprecedented growth in the first half of 2024. Occupancy rates soared 1% YoY during the six-month period, with a 7% YoY rise in the average daily rate (ADR) that resulted in an 8% YoY leap in the revenue per available room (RevPAR).

Key performance indicators (KPIs) in Makkah and Madinah have largely ascended on an annual basis in H1 2024, with their RevPAR climbing YoY by 4% and 15%, respectively. For the same period, Riyadh’s ADR jumped 25% YoY, driven by increased corporate visits given the centering of such events in the capital.

Moreover, JLL expects tourism to play a pivotal role in the Kingdom’s economic diversification, cementing a positive outlook for the local hospitality sector. This is especially given the $800 billion planned investments over the next decade and a robust pipeline of flagship events like the 2027 Asian Cup, Expo 2030, and FIFA World Cup 2034.

The newly-introduced global star rating system is helping address short-term quality issues and support long-term market improvement.

Office Sector:

Based on insights gathered from industry sources and experts, the report showed that the Saudi office sector remains competitive, with landlords driving rental negotiations and new market entrants, while existing tenants expand or upgrade their space.

Around 52,000 square meters (sqm) of office space was added in Riyadh in the first half of 2024, bringing the total existing supply to 5.2 million sqm. Meanwhile, Jeddah’s office stock remained unchanged at 1.21 million sqm for the same period.

A significant new supply of around 249,000 sqm is expected in Riyadh, with another 48,000 sqm in Jeddah, by the end of the year. In DMA, demand for office spaces, particularly from government-related entities, has led to a 10% YoY rise in average Grade A rents by Q2 2024.

Demand for quality institutional grade office properties, especially in northern Riyadh, saw a 19% YoY uptick in Grade A rents to SAR 2,090 per sqm. Further, Jeddah’s Grade A rents advanced 11% YoY to SAR 1,335 per sqm.

Retail Spaces Sector:

The expansion of new market offerings has attracted retailers to northern Riyadh, after remaining cautious of heightened market competition and postponed expansion plans due to anticipated new market supply.

The Saudi retail spaces sector’s shift toward innovative shopping experiences reinforces the elevated preference for e-commerce locally, which has adapted well to rapid socio-economic changes with the integration of cinemas, food & beverage, and entertainment facilities.

Regional super malls dominate the shopping scene in Dammam and Dhahran, while Khobar offers a unique waterfront shopping experience.

Meanwhile, Riyadh saw no new major malls in the first half of 2024, but Jeddah expanded its retail stock by adding 106,000 sqm, bringing the total supply to 2.16 million sqm by the end of the six-month period.

In Jeddah, average rents for regional super malls surged by 4% YoY in H1 2024, while regional malls saw a 4% YoY decline.

In general, the sector is poised for a positive long-term outlook. Although Riyadh's retail space remained flat at 3.48 million sqm, an additional 77,000 sqm is set to be added later this year.