Continued government spending on giga-projects, coupled with growing developments in the entertainment sector, is likely to stimulate demand in the real estate market in Saudi Arabia, as it looks to reduce reliance on oil, indicates JLL’s 2019 mid-year review report.
The Kingdom’s economy accelerated by 1.6% in the first three months of 2019 compared to 1.3% in the same period last year, according to official government data.
With conditions remaining soft across most sectors of the market in the first half of 2019, the hospitality and entertainment industries witnessed a number of major development announcements. These included the revealing of Al Qiddiya’s master plan in Riyadh, aiming to cement the city’s position as the ‘Capital of Entertainment, Sports and the Arts’, as well as the launch of the Kingdom’s first arthouse ‘Cinema El Housh’ in Jeddah, apart from religious tourism.
“These projects are expected to generate large opportunities for job creation and private sector participation in the economy, particularly in the hospitality sector, while also enhancing the quality of life of the local population. Looking ahead, this is expected to reflect positively on the number of tourists arriving in the Kingdom, in turn, boosting hotel performance levels,” observed Dana Salbak, associate, JLL MENA. “As these projects trigger other large-scale real estate development activity, and the government actively drives non-oil economic growth, in line with Vision 2030, we can expect more positive impact on the overall market in the long run.”
The real estate market in Riyadh softened further during the second quarter of 2019. Retail malls recorded mixed performance with average rental rates in the better quality super-regional malls remaining stable, while decreases were noted in regional centres and community centres.
Riyadh’s retail market saw the delivery of approximately 1.7 million sqft of GLA in Q2 2019. This increased the total market inventory to 24.7 million sqft. The Zone and University Avenue were two prominent and well received additions to the market over the second quarter. In line with global trends and the growth of the food and beverage (F&B) industry, these additions consist of various outlets ranging from high-end dining to fast food restaurants, in addition to luxury brands that were once absent from Riyadh’s retail scene.
Construction is currently underway to complete an additional 3 million sqft of retail space over the next six months. These include retail centres such as Qurtoba Boulevard, River Walk Center and Shorofat Al Nada Park. This comes as developers in the Kingdom look to differentiate their products to secure a large consumer base.
Retail rents in Riyadh registered mixed performance over the second quarter. While average rents in regional malls and community centres declined 6 % and 5%, respectively, in Q2 2019 versus Q2 2018, rents in high-quality super-regional malls remained stable over the same period. This is particularly the case in those malls where owners have successfully managed to introduce new concepts such as entertainment options and niche F&B outlets. Meanwhile, the decline in rents in regional and community malls can be attributed to tenants moving out of the older centres and into the higher quality malls. As such, vacancy rates increased in Q2 2019 to register 14%.
There were no notable mall completions in Q2 2019, leaving the total retail supply in Jeddah relatively unchanged at approximately 15.3 million sqft. Looking ahead, the market is expected to witness an additional 807,293 and 1.8 million sqft of retail GLA in 2019 and 2020, respectively, with the potential completion of the retail component of Jeddah Park (Serafi Mall – 1.3 million sqft) on Tahlia Street. The remaining pipeline comprises of neighbourhood and community centres, with notable projects including Atelier Lavie, Sunset Avenue, Obhur Mall, Manuel Square, Al Hamra Square and WOW.
While a number of commercial-driven cinema multiplexes have emerged across the country, Q2 2019 saw the launch of the Kingdom’s first arthouse ‘Cinema El Housh’ in Jeddah’s historic district Al Balad. While this was introduced as part of the Jeddah Season festival, more such initiatives might be launched in the future as the Kingdom aims to increase household spending on entertainment, and improve participation in cultural activities in line with Vision 2030.
Average retail rents in Jeddah saw mixed performance in Q2 2019. While rents in regional malls decreased 3% on an annual basis, rents in super-regional centres remained stable over the same period. As landlords continued to offer yearly leasing incentives to retain tenants, market wide vacancies decreased marginally to reach 10% year-on-year. Looking ahead, retail rents and vacancies are likely to face further pressure as more supply is expected to enter the market over the next 12-24 months. This will give tenants more choice and negotiating power. Pressure is also likely to mount from the growth of e-commerce in Saudi Arabia.
Delays to retail projects currently under construction left the total stock of retail space unchanged at 13.34 million sqft over the first half of 2019. A further 509,132 sqft and 814,828 sqft of GLA is expected to enter the market in 2019 and 2020, respectively. The bulk of future retail supply comprises of community and neighbourhood centres. Scheduled completions include Naseem Souq and Naseem Line Shops within Tilal Al Naseem, in addition to the third phase of Jabal Omar. These properties are expected to deliver better shopping and entertainment experiences to target pilgrims from various countries.
While strip retail does not typically count towards quality supply, a number of retail plazas contribute to the total GLA given its significance and popularity in Makkah. The expected increase in visitors during the 2019 Hajj season is set to benefit retailers who typically enjoy above average sales during the season, particularly in areas close to the Holy Mosque.
The retail sector in Makkah continued to soften in H1 2019. While average retail rents in the Markazia area and community centres outside of the Markazia dropped 4% and 5%, respectively, rents in regional centres increased slightly by 1% due to limited stock. Meanwhile, rents remained unchanged in neighbourhood centres. With limited retail supply entering the market, vacancies remained unchanged at 5% year-on-year.
The first half of 2019 witnessed the completion of a small number of retail projects, adding approximately 215,278 sqft GLA to the supply pipeline. These projects include Villaggio, Al Sadeen Commercial Center Phase 1 and Al-Falak. These additions kept the total retail supply in DMA at 11.8 million sqft at the end of H1 2019. An additional 1.2 million sqft of retail GLA is scheduled to handover in the remainder of the year. Expected completions include Al Nakheel Mall, Patio, Pavilion Al Khobar, Matal Eatery Complex, Ajdan Walk and Lyzawan Walk.
While no new projects are scheduled for completion in 2020, there could be some delays to the projects currently under construction, thus adding to the future supply in 2020. The majority of the upcoming stock is situated within community malls.
DMA’s retail sector experienced further rental declines across the regional and community centres. Meanwhile, rents in super-regional malls saw an increase of 8% in H1 2019 versus H1 2018, as mall owners were able to offer differentiated retail concepts and experiences to attract and retain tenants. Overall vacancy rates continued to increase over the past 12 months.
According to a report by the United Nations, the fashion industry accountsFebruary 18, 2021 | By Shruthi Nair
The jewellery making industry has been under tremendous scrutiny over the yearsFebruary 11, 2021 | By Shruthi Nair
UAE-based Carrefour will become the first retailer in the region to offer new levels
The Organic Farmers’ Market is back in Bay Avenue for its 12th
UAE-based Lulu Group recently inaugurated its first-ever all-female staff store in Jeddah,
Jones the Grocer, the gourmet grocer and cheese retailer launches the Jones
UAE-based Al Maya Supermarkets is hosting a two-week food festival at select
Locally-owned supermarket Spinneys has launched its ‘Power of Plants’ initiative in the
Carrefour UAE has launched “Cookit Yourself” — a curated recipe box created
UAE-based Al Islami Foods, one of the largest frozen food companies in
Marks & Spencer’s plant-based range now offers over 25 vegan products including meat-free
World’s largest fully integrated online brand in fresh fish and meat e-commerce
Homegrown, organic and plant milk company, Koita has announced its expansion into
Majid Al Futtaim’s financial results revealed that in 2020, the Carrefour business
UAE-based Majid Al Futtaim today announced its audited operational and financial results
Words by Tad Tilahun, Visa’s Senior Vice-President, head of Products & Solutions
Carrefour has announced that it is expanding its robotic fleet, adding 11
Words by Fadi Moukaddem, SVP & Chief Financial Officer, Visa CEMEA With
As the COVID-19 pandemic swept the world in early 2020, sector after
Consumers in the GCC are among the world’s most optimistic when considering
Marking the 200th hypermarket opening in Cairo, Egypt, LuLu is celebrating the
Emerging technologies and IT integration in businesses have been taking place for
Data presented by Fraîcheur Paris indicates that beauty products accounted for 22% of the
Tighter restrictions on hotels, restaurants, shopping malls and entertainment venues on account of
While the MENA region’s e-commerce sector was witnessing significant growth of 15-20%