Retail sector poised to get a boost in Riyadh’s realty market

Riyadh / Emirates Business

With retail sales continuing to increase, this could be the first sector to recover in Riyadh real estate market, highlights JLL’s Q3 market overview report. As the government launched the $2.6 billion entertainment company in September, Shoppertainment remains a key concept in the retail industry among entertainment, leisure and F&B tenants.
The growing participation by women in the workforce in Riyadh increased 1% quarter-on-quarter, to reach a total number of 397,000 women currently employed. Furthermore, recent laws introduced to allow women to drive from 2018, will likely increase the spending power of women in Saudi, resulting in increased demand for retail space.
“The government’s agenda very much focuses on expanding the tourism and entertainment sector. As a result, government spending has increased in these areas, as shown by the launch of the entertainment company in September,” said Eng. Ibrahim Albuloushi, National Director and Country Head, JLL. “Furthermore, there remains increased growth in investment across all real estate sectors. Two new REIT’s have been listed on the Saudi Arabian stock market during Q3, bringing up the total REIT’s listed to six. A number of these REIT’s are currently seeking to acquire additional properties in Saudi Arabia, which will aid in boosting the real estate sector,” he added.
The Kingdom aims to diversify the economy from its dependency on oil and on the business tourism sector to include leisure and entertainment. These economic ambitions are expected to benefit the hospitality sector in the long-term.
The affordable housing sector has witnessed positive activity
as the result of the ongoing efforts by the Ministry of Housing to
increase home ownership, in
line with the National Transformation Program.
Q3 2017 witnessed the completion of approximately 67,000 sq m of office space including Administrative Palaces by Ajlan (32,000 sq m), the office portion of Square 6 by Al Habdan (21,000 sq m), Oud Square by Al Hudaib (5,700 sq m) and the office portion of the Residence (4,600 sq m) and the Wahat At Tafaseel (4,000 sq m).
The level of new supply is expected to increase significantly, with around 650,000 sq.m currently scheduled to complete in 2018, including Majdoul Tower (75,000 sq m), Ar Rajhi Tower (30,000 sq m), Cayan Mefic Center (12,000 sq m) and Malathek 1 (20,000 sq m).
Vacancies have increased by 1% over the past year, to reach 16% in Q3 2017. Vacancies are expected to increase slightly further in the next 12-months, with soft demand and further supply in the pipeline. Rents have decreased 4% over the past 12 months, to reach an average of SAR 1,244 per sq m. Demand for space has shifted from new, shell and core offices to fitted-out (previously occupied) offices, as occupiers seek to reduce capital expenses. Rents are expected to continue to soften for the foreseeable future as supply continues to outpace demand.
The Ministry of Housing distributed almost 18,000 affordable residential products in Riyadh during Q3 2017, including off-plan residential units (9,500 units), cost-free developed residential land plots (1,100 plots) and subsidized housing loans (6,900 loans). The Ministry is targeting assistance to 280,000 families across the Kingdom in 2017 of which 185,000 have been allocated as at Q3 (leaving 95,000 pending for the rest of the year.
Retail sales continue to increase. The latest data from SAMA shows a 32% YT August increase in the number of point of sales transactions compared to the same period from last year, and a 7% increase of the value of transactions during the same period.