Rental rates in Riyadh’s office sector could drop by 3 per cent due to extreme oversupply, a report said, adding that rates are likely to remain static in the retail and industrial sector in 2014.

Meanwhile, rental rates in Jeddah will increase by 5 percent in all sectors, forecasted BMI in its Saudi Arabia Real Estate Report Q1 2014, according to Saudi Gazette.

"We believe that net yields will remain consistent, and that no significant change will come to this market while it is such a state of oversupply," the report was quoted.

"The commercial market in general suffers from oversupply and is forecast to undergo limited growth in the short term; our in-country sources and latest data collection do not contradict this long-held view in light of the dynamic supply pipeline.

Of the three sub-sectors that we survey there are pockets of growth opportunity, particularly in the retail and industrial segment," the report noted.