Saudi Arabia’s Prime Office Rental Space Sees 5% Growth in Q1 2024
In the bustling city of Riyadh, Saudi Arabia, the prime office rental space sector experienced a 5 percent growth in transactions during the first quarter of 2024, as reported by industry experts. This growth marked a positive trend in the real estate market, showing signs of increasing demand and activity.
Riyadh Achieves 98% Occupancy Rate with 20% Rent Increase
According to Savills, a leading global real estate services provider, Riyadh boasted an impressive occupancy rate of 98 percent in early 2024. Additionally, rents in the city saw a substantial 20 percent year-on-year increase, indicating a thriving market for office spaces.
Challenges Faced with Limited Availability of Office Spaces
Despite the healthy demand for office rentals, there was a notable decrease in the number of transactions in the first quarter. Ejar data revealed a 27 percent drop in transactions quarter on quarter, mainly due to the limited availability of office spaces in the market. This scarcity posed a challenge for potential renters.
Grade A Offices Witness 5% Rent Increase
While overall transactions decreased, Grade A offices saw a 5 percent increase in rents compared to the previous quarter. This rise in rental prices was attributed to the high demand for quality assets amidst their limited supply in the market, showcasing the preference for premium office spaces.
International Interest in Riyadh’s Office Space Market
A significant portion of inquiries for office spaces in Riyadh came from overseas, with 37 percent originating from US corporations. This international interest highlighted Riyadh’s appeal as a business hub, attracting foreign companies to establish their regional headquarters in the city.
Strategic Economic Diversification Plan Driving Corporate Interest
The surge in corporate interest in Riyadh was attributed to the country’s strategic economic diversification plan. Over 180 foreign companies chose to set up their regional headquarters in the city, surpassing initial targets. This confidence in Riyadh’s potential was further solidified by the presence of prominent entities like Franklin Templeton and Allen & Overy.
New Office Space Expected to Address Demand Concerns
To meet the growing demand for office spaces, over 420,000 sq. m of new Grade A office space is expected to be available by the end of the year. This influx of new office spaces will provide tenants with more options and help stabilize rental prices in the market, addressing concerns about limited availability.
Diverse Industry Interests Drive Occupier Inquiries
The first quarter of 2024 saw significant leasing activity in Riyadh, with legal services leading the way in transactions. Other sectors like engineering, manufacturing, and information technology also showed strong interest in office spaces. Occupier inquiries were dominated by technology, media, telecommunications, banking, financial services, and insurance companies, reflecting a diverse range of industry interests in the market.