According to a report by real estate company Savills, despite macroeconomic challenges, the office real estate market in Riyadh has maintained good momentum in the first quarter of 2024.
The report noted that the efforts to diversify income sources and the push for foreign investment made by “Vision 2030” will likely contribute to the continued rise in Grade A offices in 2024.
Around 74% of enquiries to Savills come from outside, with 37% coming from American corporations, indicating that Riyadh is drawing in foreign businesses to set up shop.
International businesses are being drawn to Riyadh by its expanding market, promising future, and 30-year tax relief for regional headquarters, which is solidifying the city’s status as a major regional hub for a variety of industries.
The legal services, engineering, manufacturing, and information technology sectors saw the most leasing activity in Q1 of 2024.
Riyadh has a Grade A occupancy rate of 98% due to a shortage of prime office space, according to Savills data, and rent increases of 5% every quarter and 20% annually.
Around 75% of transactions involve relocations to business parks or the King Abdullah Financial District, indicating their high demand.
Savills stated that 420,000 square metres of new Grade A office space are anticipated by the end of 2024 in order to meet demand.
“Despite healthy demand, a significant decrease in the number of office rent transactions was recorded in Q1, with Ejar data indicating a 27% drop in transactions quarter on quarter, due to the limited availability of office spaces,” Amjad Saif, Head of Transactional Services at Savills in KSA, said, as reported by Zawya.
“Riyadh is experiencing a remarkable surge in corporate interest, with over 180 foreign companies surpassing the initial target of 160 choosing to establish their regional headquarters in the city,” Ramzi Darwish, Head of Saudi Arabia at Savills Middle East, commented.
“This growing confidence reflects the robust potential of the Saudi capital, fuelled by the country’s strategic economic diversification plan,” Darwish added.