Dammam Real Estate Market Overview Report – Q1 2018
New energy park to fuel demand for industrial & office space in the Eastern Province
While the National Transformation Plan seeks to diversify the Saudi economy away from the oil and gas sector, it also includes major new investments in this sector. One of the largest of these new investments in the Eastern province is the King Salman Energy Park (SPARK) to be undertaken by Saudi Aramco. Spanning 50 sq km, it is estimated that the energy park will contribute SAR 22.5 billion (USD 6 billion) to the national GDP annually once wholly developed by 2035. In addition, it will boost the downstream petrochemicals sector in line with the National Transformation Program 2020.
One of the key objectives of the Saudi Vision 2030 is to increase the contribution of local content across different industrial sectors. The recent announcement of the King Salman Energy Park (SPARK) in the Eastern Province is a major step in this process. SPARK spans an area of more than 50 sq km, situated between Dammam and al-Hasa. The park is expected to be developed in 3 phases, with the first phase expected to complete by 2021. Saudi Aramco will be the main anchor tenant for phase 1, with other likely tenants including Schlumberger, Baker Hughes-GE and Oilfields Supply Company Saudi. The development of this park is expected to enhance the office market in the DMA area.
Following the completion of its Khobar project (272 villas) in 2017, the Ministry of Housing has announced 12 public private partnerships situated in the DMA (with a total of more than 20,000 units). The largest of these projects are Al Nakheel (by Mawten Technology and Construction), Farida (by Maya / Masar) and Sunset Hills South (by Al Ameriah) each of which could deliver more than 4,500 units. Smaller projects include Jasmine Resideneces (112 Apt by Bwabt al-Dar), Al Shubaili (43 Apt by Al Raem Company), Dammam Hills (50 Apt by Jubail Development Company), Sea View Khobar Housing (1,000 villa by Anan), Sunset Hills Dammam Project (1,899 townhouse by Al Ameriah), Nesaj Town Dammam Housing (768 townhouse by Retal Development Company), Dammam Oasis Northern Dammam (2,952 townhouse by Dar al Bayan), Madd Northern Dammam (728 townhouse by Dar Al Ibdaa Development & Real Estate Investment) and Al Wajha Dammam Housing (590 villa by Al Hakmiah). No completion dates have yet been announced for these projects.
Despite the introduction of VAT in January 2018, points of sale transactions in the DMA increased by 35% in volume and 10% in value YT April 2018 according to the latest data from SAMA. Given its relatively low level (5%) and the decision of many retailers to absorb the tax rather than passing it on to consumers, VAT has had a relatively limited effect on the performance of the DMA retail sector in H1 2018. It has however contributed to the continued trend for consumers to focus on special offers and ‘value for money’ products.
Two new fees and taxes have been introduced across all hotel markets in Saudi over the past 6 months. In addition to the 5% VAT from January, a new municipal fee was also introduced by the Ministry of Municipal and Rural Affairs (MOMRA) in February 2018. This fee is levied at 5% of room revenues from 4 and 5 star hotels and 2.5% from 3-star hotels and serviced apartments across the Kingdom.
Despite these additional costs, the hotel sector is not expected to experience a significant decrease and the outlook for the medium and long term is positive due to the introduction of tourist visas and other government initiatives to promote tourism and leisure as part of Vision 2030 to diversify the Kingdom’s economy away from oil. The regulations for tourist visas were completed by the Saudi Commission for Tourism and National Heritage (SCTH) in April 2018 and are likely to be implemented shortly. Additionally, household spending on cultural and entertainment activities is projected to increase from the current level of 3% to 6% in line with the initiatives introduced within Vision 2030. Demand for hotel rooms is expected to be strengthened by the growth in both local and foreign leisure travel in the medium to long term.