In a report on the outlook for real estate in Saudi Arabia, CBRE noted that multiple initiatives, helmed by the country’s Vision 2030 agenda, are expected to drive economic diversification and economic growth.
These include the Saudi Arabia Green Initiative to reduce emissions, the Shareek program that aims to drive investments of USD 1.3 trillion by 2030 through public-private partnerships, increased activity by the Public Investment Fund, and real estate tax reforms.
Here are the top trends from the report:
INCREASED OWNERSHIP IN RESIDENTIAL REAL ESTATE IN SAUDI ARABIA
Saudi Arabia’s Ministry of Rural Affairs and Housing has offered financing and housing solutions to increase home ownership rate to 70% by 2030, in line with Vision 2030. Millennials have emerged as a key demographic in this space. Further, work-from-home and social distancing norms continue to put the focus on smart homes, larger unit sizes, and well-supported staff and labour accommodation projects for residential real estate in Saudi Arabia.
OFFICES TO ACCOMODATE REMOTE WORKING
Companies will need to find a mix of both traditional and flexible office spaces to optimise occupational strategies and portfolios for the hybrid working trend. Flexible lease terms and structures are likely to gain more approval. The Saudi government is also introducing initiatives to boost innovation and technology for the future of the workplace. Supply of Grade A units for office real estate in Saudi Arabia is expected to increase substantially in the next 1-2 years.
ADAPTING THE RETAIL MODE FOR ECOMMERCE
Retail will need to shift to more flexible, omnichannel, and tech-enabled models. While the physical retail experience remains in place, online shopping and ecommerce trends are changing expectations nonetheless. Local ecommerce players continue to grow their market cap, while “signature assets” to be delivered in the next 1-2 years are expected to make way for more attractive leasing opportunities within retail real estate in Saudi Arabia.
CHALLENGES REMAIN FOR HOSPITALITY
Reductions and rationalisations will continue as the hospitality industry contends with prolonged closure of borders. Recruitment of skilled local talent is still a challenge for the sector, but investor confidence remains put, braced by government initiatives such as the Red Sea project and AlUla.
MIXED BAG FOR REAL ESTATE IN SAUDI ARABIA IN THE INDUSTRIAL AND LOGISTICS SECTOR
The industry and logistics sectors can expect a boost from the National Industrial Development and Logistics Program. Further, infrastructure improvement projects for air, rail and road are in the pipeline, along with the establishment of eight special economic zones by 2030.
Food security and cold storage space, and fulfilment and distribution facilities, are expected to be in top demand, while secondary assets will continue to face pressure on occupancy and rental rates.
Photo credit: www.worldfinance.com/wealth-management/saudi-arabias-vision-2030-plan-spurs-international-investment, www.qiddiya.com
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