Offices in Riyadh reached 96 percent occupancy, hitting the highest level in five years, as foreign business licenses surged in the Saudi capital.
According to the latest analysis conducted by real estate consultancy Knight Frank, most prime office buildings in the city are currently experiencing unprecedented levels of demand.
«Companies from around the world continue to demand their share of the unfolding economic transformation in Saudi Arabia,» said Faisal Durrani, head of Middle East research at Knight Frank.
He noted that the number of international business licenses grew by 358 percent last year, with the majority of demand concentrated in the capital, Riyadh.
As a result, office rents in Riyadh have risen by 6.5% over the past 12 months.
«As occupiers globally focus on best-in-class office space as a tool in the war for talent and to meet internal ESG considerations, Riyadh's best office buildings are experiencing unprecedented levels of demand,» said Durrani.
Jeddah's office market is stable
In Saudi Arabia's other major city, Jeddah, demand for office space has also begun to grow slowly but steadily, according to the Knight Frank report.
This revival is underpinned by the availability of new real estate projects, including ROSHN, Uptown Jeddah, Al Ballad Development and Jeddah Central, which have opened new offices in Jeddah.
«We are witnessing a slow but steady reversal of the office downsizing decisions made in Jeddah during the pandemic. As we slowly move past COVID-19, businesses are rapidly returning to the office full-time, driving growing demand for offices in Jeddah,» said Talal Raqqaban, partner for valuation and advisory at Knight Frank.
According to the Knight Frank report, prime office rents in Jeddah also rose by 2.5% during the first quarter, while Grade B rents declined by 0.5% over the same period.
International retailers are investing in the Kingdom
The report notes that Saudi Arabia's retail sector is also growing steadily, and of the 2,056 foreign investment licenses issued in the fourth quarter of 2021, 44 percent were related to the retail and e-commerce sector. This indicates a strong desire among international retailers to invest in the Kingdom, according to the report.
Pedro Ribeiro, head of KSA Retail Advisory at Knight Frank, said: «We have noted a steady stream of requirements from international retailers wishing to enter the Kingdom, with a focus on Riyadh, which is placing upward pressure on rents.».
He said that shopping malls are the primary target for these new entrants, and rental rates at regional and super-regional shopping malls are beginning to rise as new requirements gain momentum.
The report also adds that Saudi Arabia's retail sector is undergoing large-scale transformation, as traditional retailers face challenges from increasing e-commerce penetration and changing consumer behavior.