RIYADH, Saudi Arabia; DUBAI, UAE, 26 September 2022: KPMG released its first ever interactive and advanced “Riyadh Real Estate Market Overview”, highlighting the indicative investment opportunities, market trends and market performance for the first half of 2022, covering four core real estate sectors: residential, retail, office and hospitality.
Making the announcement through a Press release, KPMG said the overview comes in an insightful, easy to navigate and interactive dashboard, which allows sorting in three dimensions by selecting sectors, sub-sectors and zones of the capital city of the Kingdom of Saudi Arabia. Users can select multiple sub-sectors and zones to witness a customised result in terms of market performance and indicative investment opportunities, KPMG said. Furthermore, the dashboard illustrates indicative locations that can be considered for future developments in the respective sector and sub-sector, it added.
KPMG said it found that demand for housing units, particularly in the affordable segment, is continuously increasing, despite the recent slowdown – mainly driven by a large and growing population, coupled with growing urbanisation, declining household size and government measures. In line with Saudi Vision 2030, the government is continuously working on the provision of affordable housing units for Saudi nationals to increase home ownership, which stands at just above 62%, as per the latest published statistics, KPMG said.
“The residential market remained resilient during the pandemic, which can be attributed to strong demand fundamentals and has witnessed a positive trend in KPIs in the first of 2022,” said Rani Majzoub, Head of Real Estate Advisory, KPMG Professional Services. He observed that the demand for apartments and/or smaller units is soaring at a relatively higher pace, mainly due to affordability, an influx of expatriates and increasing market acceptance for these types of units, particularly among Saudi households.
As the largest market in the GCC region – and characterised by a strong consumer base with high disposable income – Saudi Arabia’s retail market has managed to bounce back from the effects of the pandemic, KPMG said. Retail sales are expected to grow at a CAGR of approximately five per cent between 2022 and 2025, which is likely to have a positive impact on the intake of retail space in the Kingdom, KPMG said.
After witnessing a subdued performance in 2020-21 due to the pandemic, the retail market has shown signs of stability in the first half of 2022, KPMG said. However, it will take some time to be back on the growing pace mainly due to increasing competitiveness in the market, which is exerting pressure on rental rates, KPMG said.
“Mixing up retail with other complementing real estate components, such as entertainment, hotel, office or residential could be a commendable idea to generate a certain footfall,” Majzoub said. “As Riyadh is positioning itself as a prime tourism destination, an influx of inbound and domestic tourists can be expected. Hence, future developments should focus on the needs of both residents and tourists.”
According to KPMG, Riyadh’s hospitality sector continues to show signs of improvement owing to a robust increase in demand generated by tourists during post-COVID recovery period. Despite the dwindling performance in 2020 and 2021 due to the closure of borders and tourist attractions, the market is witnessing an upsurge in occupancy rates, KPMG said. The long-term market outlook is likely to be positive, backed by the government’s initiatives to increase the industry’s contribution to the economy, KPMG added.
KPMG said it expects healthy performance of budget hotels – three star and four star – in the upcoming years, owing to the current market dynamics. Hence, it added, it is an investment opportunity that can be explored further with gradual recovery and an expected increase in the number of tourists.
According to KPMG, Riyadh, as the capital and commercial hub, benefits from overall commercial activities in the region. The primary demand drivers, including macro-economic indicators, population and workforce, are expected to remain affirmative, hence a positive outlook for office space demand is anticipated, it said.
According to KPMG, contrary to its historical performance, the Riyadh office market has witnessed a healthy upsurge of in the rental rates of both Grade A and Grade B segments in the first half of 2022. The market is anticipated to witness the same positive trend, particularly in the Grade A segment, during the medium term, as international companies working in Saudi Arabia would move their headquarters in the Kingdom by 2024 under Regional Headquarters Program (RHQ), hence additional uptake of office space is foreseen, KPMG said.
“The ongoing economic recovery, coupled with improving demand drivers of various sectors,” Majzoub said, “is likely to have a positive impact on the overall real estate market of the capital city.”