Jeddah Real Estate Market Overview Report – Q1 2018
Declining market conditions begin to impact Jeddah’s real estate market.
Developers are revising their asset classes and limiting less profitable assets to curb the impact on performance, retailers have started to make arrangements to capitalise on cinemas and entertainment, and hoteliers are expanding brands to target specific segments of the market.
Delays in the delivery of office buildings continued in Q1 2018, and only one property entered the market. Market conditions, which have seen office rents soften further, caused some projects to be put on hold as developers reconsidered the need (and scale) of office components in their developments. This has caused a slight decline in future office supply. However, opportunities targeting smaller businesses and start-ups looking for co-working facilities offering shared services and small fully fitted office space still exist, as this segment of the market grows.
There were no notable residential completions in Q1 2018, but several new properties are expected to hand over throughout the course of the year. Rents and sale prices declined across the board, but the rate of decline showed signs of slowing, with Q-o-Q rates declining at a slower pace than previously recorded. Further transparency and regulation in the rental market is expected following the launch of the new Ejar contracts in February.
The retail market is abuzz, as preparations for cinemas progress. Cinemas, F&B and entertainment options are becoming increasingly important features of shopping centres, and will play a greater role in shopping centre performance going forward. Retail rents generally softened in Q1 2018, while vacancies remained relatively stable compared to the last quarter.
Two hotels completed in Q1 2018 and several other properties are expected to enter the market this year. The hotel sector may continue to be competitive, as recently introduced taxes may put pressure on demand from local tourists, negatively impacting performance.