Development and demand remain subdued with office, residential rents declining in third quarter
Retail tipped to drive property market recovery in Riyadh, JLL says
Retail property is expected to be the first real estate segment in Riyadh to recover after a subdued 24 months, driven by an uptick in sales and abundance of new schemes set to complete by the end of 2017, according to broker JLL Mena .
Citing figures from Saudi Arabia’s central bank, Saudi Arabian Monetary Authority , JLL said the volume of retail transactions increased by 32 per cent year year-on-year in the months to August compared to the same eight-month period a year earlier.
There was also a seven per cent increase in the value of retail transactions during the same period, attributed to a reinstatement of public allowances for state employees, summer holiday spending and rising competition among retailers for price discounts, said JLL’s third quarter 2017 real estate market overview for the Saudi capital.
Spending power in Riyadh is on the rise, which is good news for retailers who are likely to hunt for larger retail spaces and stimulate an increasingly active retail property market over the coming 12 months, according to the report.
Meanwhile, the growing participation of women in Saudi Arabia’s workforce and plans to allow women to drive from next year will further increase the spending power of women and boost the retail sector.
Overall, retail rents in Riyadh remained stable in the third quarter of 2017, the consultancy said, although there was a 3 per cent and 1 per cent year-on-year decline in both the community retail and regional retail sectors respectively.
Still, about 44,000 square metres of additional retail space was completed in Riyadh during the third quarter – most notably, Square 6, the Welfare Center, and the retail portions of Oud Square and the Residence schemes – helping to boost supply.
Notable completions in 2018 will likely include Qurtuba Boulevard (72,000 sq m) and Reef Commercial Center (11,000 sq m), JLL added.
The positive outlook for Riyadh's retail sector differs from that of other segments of the capital’s real estate market, the report said. The residential market, for example, experienced further downward pressure in rentals, which fell 4 per cent for villas and 6 per cent for apartments, as a result of continued expatriate departures.
Offices, too, saw a 1 per cent and four per cent year-on-year decline in occupancies and rentals in the quarter respectively as demand for office space from international corporates continues to decline amid government project cuts. Future demand for office space will heavily depend on the 2018 budget due to be released in December, JLL said.
“The government’s agenda much focuses on expanding the tourism and entertainment sector, and as a result, government spending has increased in these areas,” said Ibrahim Albuloushi, national director and country head at JLL.
He noted that the real estate investment market was proving to be more buoyant, with two new real estate investment trusts (REITs) listings in Saudi Arabia during the quarter.