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Promising outlook for Riyadh’s real estate market, KPMG reports

Riyadh City Center - Saudi Arabia
Positive trends in the first half of 2022 for all core sectors of Riyadh’s real estate market set the scene for a promising future according to KPMG.

KPMG recently published its “Riyadh Real Estate Market Overview” which covered the four primary real estate sectors of residential, retail, office, and hospitality. The report conveyed positive market trends for the first half of 2022, along with indicating investment opportunities and the real estate market performance.

RIYADH’S RESIDENTIAL PROPERTY MARKET

Regardless of the current downturn, KPMG found that the demand for residential property, particularly in the affordable segment, is still rising. This is primarily due to a large and expanding population, as well as increased urbanization, reduced household sizes, and government initiatives.

According to the most recent figures available, the government is consistently aiming to boost household ownership, which currently stands at little over 62%. This is in line with the Saudi Governments Vision 2030, more specifically the Sakani Program. The Sakani Program’s goal is to increase the proportion of Saudi households that own their house to 70% by 2030. So, the Kingdom is heading in the right direction to achieve this goal.

RIYADH’S RETAIL PROPERTY MARKET

Saudi Arabia's retail market is the largest in the GCC region. It is distinguished by a solid customer base with high disposable income and has seen a healthy recovery from the adverse impacts of the pandemic. Between 2022 and 2025, retail sales are predicted to increase at a CAGR of around 5%. This is likely to have a favourable effect on the demand for retail space in the Kingdom.

Riyadh's retail market performed poorly in 2020–21 because of the pandemic, although a stable retail environment has started to pan out in the first half of 2022. Due to rising market competition, which is putting pressure on rental prices, it will take some time for the economy to resume its growth pace.

RIYADH’S HOSPITALITY SECTOR

Riyadh’s hospitality sector is starting to strengthen. This is due to a significant rise in visitor demand during the recovery phase following the pandemic. The market is experiencing an increase in occupancy rates despite the decline in performance in 2020–21 brought on by the closure of borders and tourist sites. The government's measures to boost the industry's economic contribution suggest that there will be a favourable trend in the industry over the long term. 

Due to the existing market dynamics, KPMG anticipates strong performance from 3- and 4-star budget hotels in the following years. As a result, with a slow recovery and anticipated growth in tourism, it presents promising investment potential. Although the need to investigate this matter further is wise.

RIYADH’S OFFICE SECTOR

As the capital and commercial hub of Saudi Arabia, Riyadh is well positioned to benefit from the region's overall commercial activities. KPMG conveys that the key demand drivers within Riyadh’s market such as macroeconomic indicators, population, and workforce are likely to stay strong. So, a strong forecast for demand for Riyadh's office space is expected.

In the first half of 2022, the Riyadh office market saw a solid increase in rental prices for both Grade A and B sectors, in contrast to its past performance.

International companies operating in Saudi Arabia are also expected to move their headquarters to the Kingdom by 2024. This is in line with the Regional Headquarters Program (RHQ).

Therefore, this is anticipated to further assist a continued upward trend in Riyadh's office market, especially in the Grade A segment, over the medium term. As a result, we can look forward to a higher demand for office space.

OVERALL OUTLOOK FOR RIYADH’S REAL ESTATE MARKET

All four core sectors of Riyadh’s real estate market have seen strong performance in the first half of 2022. The KPMG report brings to light the positive impact this is having. Entering a post-pandemic world has been a key catalyst for expansion throughout Riyadh’s real estate market.

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