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Saudi construction activity robust in 2020; 60,000 homes delivered

RIYADH, January 26, 2021

While much of 2020 was prioritizing the response to Covid-19, Saudi Arabia remained focused on growth and stability, long-term economic sustainability, diversification and an enhanced quality of life for its people, according to leading real estate company JLL.
 
This was especially evident in the SR990 billion ($264 billion) budget for 2021, which emphasised health and social development, as well as education spending, with each allocated SR186 billion and SR175 billion respectively, stated JLL in its 2020 Year in Review report released today.
 
"Even though there are sectors in Saudi Arabia’s property market which remain challenged as a result of Covid-19, the government is looking beyond the implications of the pandemic by continuing to support a number of measures and by investing massively in various projects to achieve its Vision 2030 goals," remarked Dana Salbak, the head of research at Mena.
 
Given the strong government support for the sector, demand for Saudi Arabia’s residential properties remained active in 2020. 
 
According to Saudi Arabia Monetary Agency (Sama), this was reflected in the mortgage growth rate figures for the year-to (YT) September 2020, which saw an 84% jump in the number of loans and a 90% growth in loan values over the same period last year. 
 
In addition, construction sector remained active, with around 60,000 units handed over in 2020. This brings the total residential supply to 1.3 million and 835,000 in Riyadh and Jeddah, respectively. While the total stock for Makkah and DMA stands at 400,000 and 363,000, respectively.
 
On the office sector, JLL said it witnessed muted activity across Jeddah, Makkah, Riyadh and Dammam Metropolitan Area (DMA) - the four main cities in Saudi Arabia.
 
Construction activity on office developments slowed down, with only 150,000 sq m of office GLA completed, representing a 67% decline from the average office GLA completed over the past three years. 
 
Going forward, corporates are expected to continue integrating and optimizing a hybrid working model to ensure their employees' safety. This includes a combination of remote and office working, it stated.
 
On the retail sector, JLL said the Saudi market witnessed an immediate impact from Covid-19, with the lockdown measures imposed limiting retail centre visitation. In addition, the increase in VAT levels and suspension of public sector allowances placed downward pressure on household incomes, leading to a prioritization of spending. 
 
This resulted in lower footfalls and in-store revenues. Average rental rates in super regional and regional malls declined by 5% and 10% in Riyadh and Jeddah respectively in Q4 2020 versus Q4 2019. Similarly, rental rates in Makkah and DMA decreased by 10% and 3%, respectively, it added.
 
On the hospitality sector, JLL said just like global markets, it too bore the brunt of Covid-19, with travel restrictions impacting business, leisure and religious tourism. 
 
"Hotels in Jeddah and Makkah registered the lowest occupancy levels in the YT November 2020, given their reliance on religious tourism. This placed downward pressure on performance metrics with Average Daily Rates (ADR’s) dropping 63% and 49% Y-o-Y in Jeddah and Makkah, respectively," explained Salbak.
 
"Riyadh saw occupancy levels drop to 48% in the YT November 2020, compared to 59% in the YT November 2019," she stated. 
 
"Consequently, ADRs declined by 8% to hit $145 over the same period. Meanwhile, hotels in the DMA saw the highest occupancy rates given the area’s status as a popular destination for domestic tourism," she added.-TradeArabia News Service



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