Real estate in Holy Cities 'not constrained by demand'
Riyadh, June 7, 2010
The real estate sector in the Holy Cities of Makkah and Madinah is unique in the Mena region in that it is constrained more by supply and capacity constraints and not demand (which is effectively unlimited), a report said.
Jones Lang LaSalle’s Holy Cities report is the first report undertaken by a globally renowned firm on the real estate sector in the Holy Cities of Makkah and Madinah.
The major findings of this report are as follows:-
• Unique markets – unconstrained by demand
• It is believed that the number of religious tourists could increase from 7.8 million to 13.75 million by 2019
• This will lead to opportunities to expand the hospitality market with a total of 82,000 rooms required by 2019
“The Saudi Government in particular has taken great strides to capitalise on the real estate in the both cities to better be able to accommodate a larger volume of pilgrims,” stated Chiheb Ben-Mahmoud, SVP at Jones Lang LaSalle Hotels.
The report states that “Given the significant movement associated with the Hajj, the prime constraint is imposed by the ground transport system rather than broader airport / seaport capacities or the ability to provide sufficient lodging capacity. Total (Hajj plus Umrah) visitors have increased from 5.3 million to 7.7 million over the past 5 years.”
“Our analysis of potential capacity constraints suggests that the total number of Hajj and Umrah pilgrims visiting Makkah and Madinah could increase to 13.75 million by 2019. The increased number of pilgrims will provide significant opportunities for additional hotel rooms in both Makkah and Madinah,” said Chiheb Ben-Mahmoud.
Jones Lang LaSalle expects the number of pilgrims performing Hajj to increase less rapidly than those performing Umrah due to the more concentrated timeframe of the Hajj. This ultimately means more significant capacity constraints, bottle necks and challenges involved.
A large number of initiatives are underway to alleviate the current infrastructure constraints to efficiently accommodate a larger number of pilgrims, which are estimated to reach around 13.75 million by 2019.
Although land ownership in the Holy Cities is limited to Saudi entities, there has been significant GCC and other foreign investment attracted to these markets in the form of joint venture agreements with Saudi entities. These include:
• King Abdulaziz International Airport, Jeddah
• Madinah Airport
• KAEC Seaport
• Haramain High Speed Railway
• Madinah Station
• Expansion of the Holy Mosque
• Hotel Expansion
Among the major projects in Central Makkah for which master plans have been approved are:
• Jabal Omar is one of the largest of these mega developments. The project is expected to deliver over 10,000 hotel rooms as part of the total built-up area of around 1.8 million square metres.
• Jabal Khandamah - This project covers 600,000 sqm of land to the east of Al Masjed Al Haram in Makkah.
• King Abdul Aziz Road - is a 3.5 km development that is planned to re-develop one of the most densely populated areas in Makkah
• Madinah Master Plan (Including Knowledge Economic City) - a 480 hectare development with a projected built up area of 8 million sqm and a projected population of 150,000.
“The traditional budget hospitality concept does not seem to provide a straightforward or relevant alternative. The optimal hospitality model in the Holy Cities is yet to be reached in a context where investors and the Saudi authorities, are challenging the conventional vision,” concluded Chiheb Ben-Mahmoud.-TradeArabia News Service