2023 Real Estate Trends: Saudi Arabia's Property Market Soars with a US$3 Trillion Future
In a report unveiled, global professional services firm Deloitte sheds light on the Saudi Arabia's real estate market for the year 2023. The report outlines a landscape influenced by positive economic conditions, showcasing a GDP surge to USD 2.6 trillion in 2023, to reach USD 3 trillion by 2030 with a projected annual growth rate of 1.6 percent, as per Oxford Economics data.
Residential Property Trends: Remote Work and Wellness-Centric Features in Focus
The trends in residential properties indicate a shift towards homes accommodating remote work facilities and integrating wellness-centric features. Demand for flexible workspaces is soaring, prompting developers to innovate office designs for hybrid work models. The retail and hospitality sectors are also adapting to changing consumer behaviours, emphasizing experiential spaces.
Stefan Burch, Partner and Head of Real Estate at Deloitte Middle East, notes, "2023 continued to be dominated by strong demand for commercial office space, reflecting robust economic activity. In the residential sector, demand has shifted to apartments, driven by affordability amid higher interest rates."
Development Landscape in 2024: High-Quality Mixed-Use Schemes Anticipated
As the market evolves, 2024 is expected to be characterised by the delivery of high-quality mixed-use schemes aligning more closely with market demand in terms of pricing and offerings, according to Burch.
Oliver Morgan, Partner and Head of Development in Deloitte's Real Estate team in the Middle East, emphasises the Kingdom's shift to a delivery mode, noting innovative approaches, sophisticated due diligence, and changing technology use leading to a more institutional approach in project delivery.
Residential Market: Ascending Prices Despite Transaction Volume Decrease
While transaction volumes in the residential sector have decreased, sales prices for villas and apartments continued to rise in 2023. Riyadh, Jeddah, and Dammam collectively recorded 67,233 residential transactions in 2023, totalling USD 21 billion, reflecting a 15 percent decrease in value compared to 2022. Sales prices and rents experienced notable growth in Riyadh and Jeddah.
Hospitality Market: Tourism Rebound and Contribution to GDP
Saudi Arabia's tourism industry rebounded, attracting 53.6 million visitors in the first half of 2023. Efforts such as facilitating tourist visas and extending visa-on-arrival to select countries supported the hospitality sector. The influx of tourism is projected to contribute 6 percent to the country's GDP in 2023. Riyadh's average daily rate surged by 18 percent year-on-year, reaching USD 213.
Office Market: Supply, Rent Increases, and Notable Additions
Office supply in Riyadh, Jeddah, and DMA stood at 5.9 million sqm, 2.1 million sqm, and 1.4 million sqm respectively at the end of 2023. Grade A office space rent witnessed an 11 percent year-on-year increase in Riyadh, 7 percent in Jeddah, and 4 percent in Dammam. Notable additions include Hiyazah Gate, Yline, North Yard, and Luxury Plaza in Riyadh's Al Yasmin district.
Industrial and Logistics: Special Economic Zones as Growth Avenues
The launch of four Special Economic Zones in 2023, including King Abdullah Economic City, Jazan, Ras Al Khair, and Cloud Computing in the King Abdulaziz City for Science and Technology, is anticipated to create new avenues for sustainable business growth, focusing on various sectors such as the automobile supply chain, consumer goods, ICT, pharmaceuticals, and logistics.
