Int’l hotel brands open in Jeddah despite tough economic times

Jeddah / Emirates Business

JLL, the world’s leading real estate investment and advisory firm, released its Q3 2016 Jeddah Real Estate Market Overview report which assesses the latest trends in the office, residential, retail and hotel sectors.
The latest market summary report discusses the opening of two internationally branded hotels — the Movenpick City Star Hotel (228 keys) and the Centro Shaheen by Rotana (254 keys) — which adds to the burgeoning supply of quality branded midscale hotels in Jeddah.
The opening marks the first property for Centro Shaheen by Rotana in Jeddah, while the Movenpick City Star Hotel is its third property in the city. A further two Movenpick properties are under construction and expected to open within the next three years.
Hotel occupancies in Jeddah have declined by 4% compared to the same period last year, but remain strong overall at 72%, according to the report. Unlike most other regional markets, average daily rates (ADRs) in Jeddah have also shown strong performance over the summer months (increasing by 5% compared to the same period last year) due to domestic tourism during the summer holidays and the Hajj pilgrimage in September.
However, a challenging economic backdrop amid low oil prices and government reforms continues to add to a slowdown across the residential, retail and office real estate sectors. Jamil Ghaznawi, National Director and Country Head of JLL KSA, said: “As the government changes the strategic direction of the country, the demand-supply ratio widens slightly amongst the office, residential and the retail market. The hotel segment has also witnessed a decline in occupancy rates of four percent compared to Q3 in 2015 despite average daily rates (ADR) increasing during the summer months.”
“The office market also observed an increase in the number of vacancies over Q3 as the government introduces measures to resize the civil service sector to reduce government expenditure and increasingly weave into the private sector. We’ve also noted that landlords responded to the current economic climate optimistically, converting offices into alternative assets such as hotels.” “Although retail vacancies have decreased slightly over the past year, they increased from 7% to 10% over the past quarter as the overall market begins to soften. These vacancies however were mainly attributed to shopping centres in less prime locations, with few vacant units in the prime malls,” said Ghaznawi.

SECTOR SUMMARY HIGHLIGHTS
Office: Several office buildings completed over Q3, most of which are located on Prince Sultan Street, adding over 23,000 square meters of office space to the market. The largest addition was Al Olaya Tower which added over 10,000 square meters. The completion of Emaar Square has been delayed to Q4 2016. Following the delivery of Emaar Square, the next notable deliveries to the market will be phase 1 and 2 of Lilian which are expected to complete in 2017 and 2018 respectively and the commercial tower part of Jeddah Park, expected to complete in 2018.
Residential: The total supply of residential units in Jeddah currently stands at almost 800,000 units, with approximately 4,000 number of units entering the market in Q3. Future quality mid-rise projects include the nearby Gardenia Residence and Diyar Al Salam Residences. A further addition to the high rise segment is also expected once the Farsi Seven Towers complete, which are expected by the end of the year.
Retail: Construction of the Elaf Galleria completed in Q3 moderately increasing supply by just over 2,900 square meters of quality retail space. Total stock currently stands at 1.15 million square meters. Year-on-Year lease rates have remained relatively stable for both regional and super regional shopping centers which decreased by 1 percent. Quarter-on-Quarter rates for regional centers increased by 5 percent, the same rate as the previous quarter, while growth in lease rate for super regional centers has slowed to around 5 percent.
Hotel: Q3 2016 witnessed the opening of two internationally branded hotels: the Movenpick
City Star Hotel (228 keys) and
the Centro Shaheen by Rotana (254 keys) which adds to the burgeoning supply of quality branded midscale hotels in the city. It marks the first property for the brand in Jeddah, while the Movenpick City Star Hotel is its third property. Furthermore, two more Movenpick properties are under construction and expected to open within the next three years.