Thursday 28 May 2020

Retail sector to drive Riyadh’s real estate market

RIYADH, October 31, 2017

With retail sales continuing to increase considerably, thanks to the growing participation by women in its workforce, this could be the first sector to recover in the Riyadh real estate market, said a report by property expert JLL.

The women employees increased one per cent quarter-on-quarter, to reach a total number of 397,000.

Furthermore, recent laws introduced to allow women to drive from 2018, will likely increase the spending power of women in Saudi, resulting in increased demand for retail space, styted the JLL in its 'Q3 market Overview' report.

As the government launched the $2.6 billion entertainment company in September, Shoppertainment remains a key concept in the retail industry among entertainment, leisure and F&B (food and beverages) tenants.

“The government’s agenda very much focuses on expanding the tourism and entertainment sector. As a result, government spending has increased in these areas, as shown by the launch of the entertainment company in September,” remarked Ibrahim Albuloushi, the national director and country head, JLL.

"Furthermore, while the development market has been subdued, there remains increased growth in investment across all real estate sectors. Two new REIT’s have been listed on the Saudi Arabian stock market during Q3, bringing up the total REIT’s listed to six," noted Albuloushi.

"A number of these REITs are currently seeking to acquire additional properties in Saudi Arabia, which will aid in boosting the real estate sector," he added.

On the residential market, JLL said the sector experienced further downward pressure in the rental sector during the third quarter as a result of continued expatriate departures.

However, the affordable housing sector has witnessed positive activity as the result of the ongoing efforts by the Ministry of Housing to increase home ownership, in line with the National Transformation Program, it stated.

The ministry distributed almost 18,000 affordable residential products in Riyadh during Q3 2017, including off-plan residential units (9,500 units), cost-free developed residential land plots (1,100 plots) and subsidised housing loans (6,900 loans).

There were no major completions in the Riyadh market during Q3 2017, with the only deliveries being approximately 5,000 villa and apartments in small scale standalone projects scattered across the city. This brings the total residential stock to 1.17 million units, said the JLL in its report.

The number of apartments sales transacted increased 39 per cent and villas 7 per cent Y-o-Y according to the Ministry of Justice. This growth in the volume of sales has however been accompanied by lower price levels.

JLL said the apartment sale prices in Riyadh fell 4 per cent, while for villas it was a 5 per cent y-o-y drop.
Apartments have generally performed more strongly than villas, as declining purchasing power has seen a continued shift in demand from villas to apartments (bearing in mind that apartment supply was relatively low).

The market witnessed a decline in villa rents by 4 per cent and apartments by 6 per cent y-o-y due to rising vacancies resulting from the departure of some expatriate dependents.

This has reduced demand for larger units and allowed more room for rental negotiations by existing tenants (including Saudi households) adding downward pressure on rents, said the property expert in its report.

On the office sector, JLL said it saw a modest decline in both occupancies and rentals. The market is most likely to witness further declines with the eventual introduction of the King Abdullah Financial District offering a significant amount of office space, said the JLL report.

Furthermore, private developers are reluctant to build additional office space given the current climate, he added.-TradeArabia News Sector

Tags: real estate | Riyadh | Retail sector | JLL |

More Construction & Real Estate Stories

calendarCalendar of Events