RIYADH: The real estate market in Riyadh is witnessing remarkable growth, with office rents increasing by 18 percent year-on-year in the fourth quarter of 2024, according to an analysis by real estate services firm CBRE.

Jeddah and Dammam also recorded rental growth, with office rents rising 10 percent and 12 percent year-on-year, respectively.

Commercial Market Trends

The surge in office rents in Riyadh highlights the city’s expanding economic landscape, fuelled by a flourishing private sector and government-led initiatives aimed at establishing the capital as a global business and investment hub.

Saudi Arabia’s real estate market is projected to reach a value of $101.62 billion by 2029, with an 8 percent compound annual growth rate from 2024.

CBRE noted that high occupancy rates in Riyadh’s prime office districts reflect strong demand, largely driven by the Kingdom’s growing non-oil economy, which is a core aspect of Vision 2030’s diversification strategy.

Despite rising rents, global investors and corporate occupiers continue to be drawn to Saudi Arabia, as evidenced by the increasing adoption of the Regional Headquarters (RHQ) programme in the fourth quarter of 2024.

In January, Saudi Investment Minister Khalid Al-Falih announced that 571 international companies had established their Middle East headquarters in Saudi Arabia, exceeding the Vision 2030 target of 500 firms. The RHQ initiative offers numerous incentives, including:

• 30-year exemption from corporate income tax
• Withholding tax exemptions
• Financial discounts and business support services

Matthew Green, Head of Research for the Middle East and North Africa at CBRE, stated:
“Saudi’s real estate sector continues to thrive, supported by a strong non-oil economy and the successful RHQ initiative, which is driving commercial market expansion and overall economic growth.”

A February 2024 report by property consultancy Sakan further confirmed the rapid expansion of Saudi Arabia’s real estate sector, with transactions surging 47 percent year-on-year to $75.7 billion.

Residential Market Growth

Saudi Arabia’s residential real estate sector is poised for significant growth, backed by strong economic fundamentals and a rapidly expanding population.

CBRE highlighted key factors contributing to this upward trend:

• Growing demand for housing in Riyadh, Jeddah, and Dammam
• Rising property prices and rental rates
• 17 percent year-on-year increase in residential mortgage value in 2024

In Riyadh, residential property prices saw an annual rise of 6 percent:

• Villas – SR6,000 ($1,599.82) per square metre
• Apartments – SR5,200 per square metre

In Jeddah:

• Apartments – SR4,000 per square metre
• Villas – SR5,700 per square metre

According to Saudi Arabia’s General Authority for Statistics, the real estate price index grew 3.6 percent year-on-year in the fourth quarter of 2024, largely driven by a 2.5 percent rise in residential land plot prices, which make up 45.7 percent of the index.

The Saudi Central Bank revealed that banks issued SR91.1 billion in new residential mortgages in 2024, marking a 17 percent increase compared to 2023.

Aligned with Vision 2030, which aims to achieve a 70 percent homeownership rate, Saudi family homeownership reached 63.74 percent in 2023, according to the Housing Program initiative.

Hospitality and Retail Sectors

Hospitality:
CBRE reported a 2.1 percent annual increase in average daily hotel rates across Saudi Arabia in December 2024, leading to stable revenue per available room, up by 0.3 percent. However, rising hotel supply has led to a 1.7 percent decline in occupancy rates.

Riyadh saw notable growth:

• Average daily hotel rates increased by 14.6 percent year-on-year
• Occupancy rates rose by 0.7 percent

In contrast, Jeddah saw a 26.7 percent decline in average daily hotel rates and a 14.5 percent drop in occupancy rates.

CBRE projects that significant hotel supply growth over the next 12 to 24 months will heighten competition, particularly in Jeddah and Makkah, where a large number of new rooms are set to enter the market.

Retail:
Saudi Arabia’s retail market saw 9 percent year-on-year growth in 2024, according to CBRE. Several major shopping centres are scheduled for completion in the coming years, reshaping the retail landscape.

Upcoming developments in Riyadh include:

• Solitaire Mall – nearing completion
• 25 Mall Complex and Al Hamara Entertainment Complex – expected by the end of 2025
• Jawharat Riyadh – set to open in early 2026
• Avenue Malls – launching in early 2027

These projects will add over 600,000 square metres of new retail space to the market, potentially shifting dynamics in favour of tenants.

Saudi Arabia’s Real Estate Future

Saudi Arabia’s real estate sector is on a robust growth trajectory, underpinned by Vision 2030 initiatives, a thriving non-oil economy, and increasing global investor interest. With rising demand across commercial, residential, hospitality, and retail segments, the Kingdom continues to reinforce its position as a leading regional and global investment hub.