KSA Real Estate report by Deloitte reveals key market trends and growth projections in the Kingdom

The leading global professional services firm, Deloitte, has released its comprehensive Saudi Arabia Real Estate Report for 2023, providing valuable insights into the Kingdom’s property market growth and prospects.

The report highlights the impact of the positive economic conditions in the Kingdom so far on the performance of the real estate market, as the gross domestic product (GDP) reached SAR 10.1 trillion (USD 2.6 trillion) in 2023 and is anticipated to grow to SAR 11.6 trillion (USD 3 trillion) by 2030. This is based on a projected annual growth rate of 1.6%, as per data sourced from Oxford Economics.

The trends in residential property are shifting towards homes that accommodate remote work facilities and incorporate wellness-centric features. The demand for flexible workspaces is also witnessing a surge, compelling developers to innovate office designs tailored to hybrid work models. Similarly, the retail and hospitality sectors are also undergoing adaptation to cater to changing consumer behaviors, with a particular focus on experiential spaces.

Stefan Burch, Partner and Head of Real Estate at Deloitte Middle East, “2023 continued to be dominated by strong levels of demand for commercial office space both from large corporates and SMEs reflecting robust economic activity in the Kingdom, while in the residential markets demand has shifted to apartment stock as affordability continues to be a key driver amidst a backdrop of higher interest rates. As the market continues to evolve, 2024 looks to be dominated by the delivery of high-quality mixed-use schemes that more accurately respond to market demand in terms of pricing and offers.” Oliver Morgan, Partner and Head of Development in Deloitte’s Real Estate team in the Middle East said, “The Kingdom is now in delivery mode; the last 12 months have seen innovative approaches to bring key development projects to market. The sophistication of due diligence, regulations and use of technology are all changing how investors and our clients are planning projects – all leading to a more institutional approach to delivery. Our Predictions for the market focus on continued growth in landmark funding deals, the impact of ESG as a value creator from lifecycle cost savings and how retail needs to evolve to stay relevant .” Residential market

Transaction volumes in the residential sector have decreased, yet sales prices for villas and apartments continued to ascend in 2023 compared to the previous year. Notably, Riyadh, Jeddah, and Dammam collectively recorded 67,233 residential transactions in 2023, totalling SAR 79 billion (USD 21 billion), reflecting a 15% decrease in value compared to 2022. Sales prices and rents have experienced notable growth across Riyadh and Jeddah.

Hospitality market

Saudi Arabia’s tourism industry is on the rebound, attracting 53.6 million visitors in the first half of 2023, with 14.6 million inbound and 39 million domestic tourists. This influx in tourism is projected to contribute 6% to the country’s GDP in 2023.

Efforts such as facilitating tourist visas for GCC residents and extending visas on arrival to UK, US and EU residents have supported the country’s hospitality sector in the post-pandemic period.

The KSA occupancy rate averaged 63% in 2023, increasing from 58.2% in 2022. Occupancy in Riyadh averaged 64.7%, while Jeddah averaged 63.2% in 2023.

Riyadh’s average daily rate (ADR) surged by 18% Y-o-Y during 2023, reaching SAR 797 (USD 213).

Riyadh hotels recorded the most robust occupancy in October and November, reaching 80%. Meanwhile, Jeddah hotels recorded their highest occupancy performance in May at 79%.

Office market

Office supply in the key markets of Riyadh, Jeddah and DMA stood at 5.9 million sqm, 2.1 million sqm and 1.4 million sqm, respectively, as of the end of 2023. Grade A office space rent witnessed an 11% year-on-year increase in Riyadh, 7% in Jeddah and 4% in Dammam. Notable additions include Hiyazah Gate, Yline, North Yard and Luxury Plaza, located in the Al Yasmin district of Riyadh. A significant portion of the King Abdullah Financial District (KAFD) office supply has been successfully delivered, demonstrating high pre-leasing/leasing rates.

Industrial and logistics

The launch of four Special Economic Zones (SEZs) in 2023, including King Abdullah Economic City, Jazan, Ras Al Khair, and Cloud Computing in the King Abdulaziz City for Science and Technology, is expected to create new avenues for sustainable business growth. These zones are poised to become global investment destinations, focusing on automobile supply chains, consumer goods, ICT, pharmaceuticals, and logistics sectors.

To access the full report, please visit https://deloi.tt/3UORUx5.