Riyadh office rents are starting to fall as a construction boom in Saudi Arabia leads to a glut of new buildings coming onto the market.
Prime office rents in the Saudi capital inched downwards during the first half of the year with the cheapest prime rents falling from about 900 Saudi riyals (Dh881.44) per square metre per year in December to about 800 riyals in June, according to statistics from the property consultancy CBRE.
Areas such as King Abdullah Financial District (KAFD) were particularly affected, CBRE said, and landlords were beginning to offer significant incentives such as rent-free periods to tenants to move in as more new buildings came online.
"Headline rents offered at KAFD are high in comparison to existing market norms, but terms are flexible and there is room for negotiation on incentives," said Mike Williams, the head of research and consultancy, CBRE Middle East.
"In the existing prime office areas in the southern central areas, office rental rates are starting to come under downward pressure and new supply in these areas is forcing both lower headline rents and more generous incentive packages," Mr Williams added. However, CBRE reported the most expensive prime rents for offices in the city remained unchanged at 2,000 riyals compared with December.
Meanwhile rents in Jeddah remained static during the period. UAE-based contractors have flocked to Saudi Arabia since the global financial downturn after the Saudi government announced billions of dollars worth of infrastructure and construction spending.
[ lbarnard@thenational.ae ]
