The office market in Saudi capital Riyadh is experiencing strong growth, driven by heightened demand and a significant rise in rental values, according to leading real estate expert Savills.
The city’s strategic efforts to diversify its economy, especially through non-oil sector expansion, have transformed Riyadh into a key business hub, attracting a steady influx of international companies, stated Savills in its Q3 2024 Riyadh Office Market report.
According to the report, Riyadh’s projected GDP growth for 2024 is 1.4%, supported by a solid 5% expansion in non-oil activities and stable inflation at 1.7%.
Foreign direct investment (FDI) in Saudi Arabia saw a notable quarterly increase of 23.4% in Q2 2024, totalling SAR11.7 billion, underscoring strong investor confidence. Additionally, over 120 foreign companies, including major players like Goldman Sachs and Frost & Sullivan, have moved their regional headquarters to Riyadh this year.
This trend highlights Riyadh’s appeal as a premier regional hub for international business, stated the expert.
According to Savills, the city’s office market recorded impressive occupancy rates, with Grade A spaces reaching 98%, reflecting high demand for premium office locations. Average rental values for Grade A office space have seen substantial year-on-year growth, with key areas experiencing increases of up to 19%.
This steady rise underscores Riyadh’s attractiveness across key sectors, including Technology, Media, and Telecommunications (TMT), which accounted for 40% of leasing activity, followed by Consulting and FMCG sectors at 20% each.
"The evolution of Riyadh’s office market is a clear indicator of the city’s pivotal role in advancing Vision 2030," said Amjad Saif, the Head of Transactional Services at Savills Middle East.
"We’re seeing a diverse range of sectors drawn to Riyadh’s business environment, with heightened demand for high-quality office spaces. This increased activity reflects the city’s position as a strategic gateway for companies aiming to establish a long-term foothold in the Middle East," he noted.
Additionally, incentives from Saudi Arabia’s Regional Headquarters (RHQ) program, such as Saudization exemptions, tax benefits, and accelerated visa processing, make Riyadh even more attractive to foreign companies.
The upcoming 2025 investment system update is expected to ease regulatory restrictions and enhance investor rights, further cementing the Kingdom’s business appeal.
With demand growing, Savills reports a significant rise in inquiries for flexible workspaces, particularly for office spaces under 250 square meters, which accounted for 48% of inquiries. This trend reflects companies’ preferences for adaptable work environments, aligning with hybrid working models.
"Riyadh’s office market is quickly emerging as a regional powerhouse for business growth, supported by rising demand for premium office spaces and a robust economic outlook," stated Ramzi Darwish, the Head of KSA at Savills Middle East.
"The combination of high occupancy rates and escalating rental values demonstrates Riyadh’s appeal to both regional and international companies, especially those looking to capitalise on the Kingdom’s pro-business environment and regulatory advancements," he added.
To address the high demand, Riyadh is set to add over 1.6 million sq m Grade A office space by 2028, with major developments such as Prince Mohammed Bin Salman Nonprofit City and Diriyah Gate expected to reshape the city’s office landscape.
The expansion of these zones will likely moderate rental growth and provide tenants with more choices in the years to come.
