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Jeddah - Yasmine El Tohamy - RIYADH: Office space rents across all grades in Riyadh rose in 2023 due to increased demand from national and international occupiers, a study showed.
According to a report released by real estate consultancy services CBRE, average prime rents in Saudi Arabia’s capital city increased by 20.7 percent in the 12 months leading up to the fourth quarter of 2023.
The analysis added that average workplace rents in Riyadh for Grades A and B grew by 13 percent during the same period.
Similarly, occupancy rates of Grade A properties reached 100 percent, while it stood at 99.4 percent in Grade B spaces.
Grade A workplaces enjoy a premium over the average rent prevailing in the area due to their location, infrastructure, and new build.
On the other hand, Grade B office properties are more affordable than Grade A spaces.
The surge in workplace rents in Riyadh during 2023 can be attributed to the Kingdom’s regional headquarters program, which encouraged international entities to establish their presence in the capital city.
According to official data, over 200 international firms have already procured licenses to operate their regional headquarters in the Kingdom.
“On the whole, demand in Saudi Arabia continues to severely outpace supply across almost all real estate market sectors, hence, we have seen relatively strong levels of performance in 2023, despite some headline economics headwinds,” said Taimur Khan, head of research at the Middle East and North Africa region of CBRE.
He added: “In 2024, whilst supply across many sectors is set to expand, we expect that it will still continue to lag demand materially, as a result we expect that performance levels will remain robust throughout the year.”
CBRE further revealed that Grade A office rents in Jededah increased by 19.7 percent from a year earlier, whereas Grade B rents slightly increased by 1 percent.
Similarly, occupancy rates for both Grade A and Grade B offices in Jeddah rose to reach 92.5 percent and 82.1 percent, respectively.
On the other hand, office space rents in Damman increased by 7.4 percent in 2023, while it rose by 7.2 percent in Khobar.
Throughout 2023 up to the fourth quarter, average apartment prices across most major cities in Saudi Arabia grew, with prices in Riyadh, Dammam and Khobar increasing by 10.7 percent, 1.8 percent and 2 percent, respectively.
However, in Jeddah’s apartment market, prices witnessed a decline of 1.9 percent.
Similarly, in the year to the fourth quarter of 2023, villa prices in Riyadh, Jeddah, Dammam, and Khobar increased on average by 5.5 percent, 4.8 percent, 0.3 percent, and 1.1 percent, respectively.
In the residential sector, total transaction volumes in Riyadh increased by 63.7 percent in the fourth quarter compared to the same quarter in 2022, reaching a value of SR22.2 billion ($5.92 billion).
Jeddah has also witnessed an increase of 23.4 percent in terms of transaction volumes valued at SR11.3 billion, while Dammam’s volumes declined by 23.4 percent to SR2.3 billion in the fourth quarter of 2023.
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