The ongoing mega-project announcements and improvements to government regulations are expected to boost demand for, and enhance the long-term performance of Saudi Arabia capital, Riyadh’s real estate sector, highlights JLL’s Q1 market overview. Reforms focused on increasing transparency, enhancing the logistics sector and improving the overall quality of living for Riyadh’s citizens are expected to accelerate the implementation of Vision 2030.
Earlier in the year, the government announced a project of SAR86 billion to revamp public spaces in Riyadh, aiming to improve the quality of life for the city’s residents. The King Salman Park will promote urban development with green spaces and will include recreational areas for the benefit of the communities and citizens in Riyadh.
“With market conditions continuing to soften in the first quarter of this year, large scale announcements aimed at stimulating economic growth are expected to boost sentiment and translate to increased demand for the capital’s real estate,” says Dana Salbak, associate, JLL MENA.
The Kingdom’s National Industrial Development and Logistics Program (NIDLP), which aims to attract SAR1.6 trillion of foreign investment by 2030 into various industries, is also expected to bode well for the commercial sector.
The retail sector specifically saw a total of 369,202 sqft of GLA being delivered to the market in Q1 2019, keeping the total retail stock at 23.7 million sqft. An additional 4.8 million sqft of retail space is currently under construction and expected to handover in 2019.
In the face of a strong supply pipeline, developers are diversifying their offerings by bringing in more entertainment outlets, local fashion and unique home-grown F&B concepts. Some of these concepts will offer a more digital experience to their customers. This comes as e-commerce continues to challenge the retail landscape. According to data from Saudi Arabia’s Communications and Information Technology Commission (CITC), the percentage of online users who engaged in online shopping in 2018 increased to 50%, up from 37% in 2016. Looking ahead, more retailers are expected to embrace the shift in shopping habits brought about by technology and expand their reach beyond brick-and-mortar to omnichannel retailing.
Retail rents continued to soften in Q1 2019, particularly in the lower quality retail centres where vacancy rates increased. This has led mall owners to offer flexible lease structures to retain tenants. In the better-quality centres located in prime locations, and where mall owners have successfully managed to revitalise their spaces and introduce new concepts, rents remained relatively stable and, in some instances, increased.
Despite the current slowdown in the retail market, favourable demographics and an expected growth in tourism are likely to drive the market in the long-run. This is supported by the government’s initiatives to boost spending through instating allowances to public sector employees – 41% of the total 2019 expenditure – and increasing subsidies – from SAR12 billion in 2018 to SAR32 billion in 2019 – under the 2019 budget. This is expected to fuel retail spending, reflecting positively on the performance of retail centres.
Words by Farimah Moeini, Snapchat Head of Industry – Retail and Travel TheJuly 5, 2021 | By RetailME Bureau
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