The performance of Riyadh’s real estate market remained relatively subdued across all asset classes. As such, all sectors remain in the downturn stage of their cycle.
The office market saw a few small project completions which left the total office GLA in Riyadh largely unchanged at around 4.10 million sq m. Meanwhile, office rents declined 4% on an annual basis and 3% Q-o-Q, on the back of a slowdown in economic conditions and business activity. Business activity focused on consolidation rather than expansion, which saw vacancy rates remain flat at 8%.
The total supply of residential units reached 1.29 million units, with a further 7,000 units expected over the last quarter of the year. Average rents and sale prices remained largely stable on a quarterly basis, with a 3% decline registered on an annual basis. While the upcoming supply pipeline consists of high-end projects, we are likely to see more affordable housing project announcements, in line with the Ministry of Housing’s drive to provide accommodation for all.
The retail market saw the completion of Al-Dhahiah Center which has had little impact on total retail GLA. Supply remained at approximately 2.14 million sq m. Rental rates continued to soften as vacancy rates increased to registered 15% across all mall types. This comes as the retail market remains under pressure, with landlords now looking to promote the concept of ‘Shoppertainment’ to differentiate their products and maintain footfall.
Activity in the hospitality market remained subdued as no new hotel rooms were delivered over Q3 2018. Total hotel room stock in Riyadh remained unchanged at around 12,400 keys. While occupancy rates improved slightly, ADR’s and RevPar’s remain under pressure.