Jones Lang LaSalle issued a real estate market overview on KSA’s Riyadh covering the first quarter of 2012. The findings revealed that with more new stock entering the market, occupiers have an increased choice of options, which is resulting in greater competition and more variation in performance as tenants increasingly focus on better quality projects.
With regards to the residential segment, Riyadh has seen an increase in both sale prices and rental levels. Approximately 23,000 additional residential units are expected to be completed across the market throughout the remainder of 2012, bringing the total residential stock to just over 912,000 units by the end of 2012 with the majority of this supply delivered through small units.
As to the office segment, the current stock is approximately at 1.6 million sq.m. A further 462,000 sq. m. is scheduled for completion over the rest of 2012. While some of this space might be delayed into 2013, all these projects are well under construction and are likely to result in a sizeable increase in quality office stock over the next two years. Vacancy rates have been generally stable in the first quarter of 2012. However, they will witness an upward pressure over the rest of 2012 given the expected injection of new supply which places downward pressure on rental levels.
The Riyadh retail market remains relatively well balanced, with no significant change in either occupancies or rental levels. Over the second half of 2012, average rents are unlikely to increase as there are many poorly performing centres that will need to reduce rents to retain tenants.
No new hotels have been completed in Riyadh during the first quarter of 2012, with the market continuing to adjust to the input of 1,200 new rooms during 2011. Occupancy levels and room rates have declined over the first three months of this year but this position is expected to be short lived as government initiatives promote more visitors to the capital.
The Mena Weekly Monitor – Bank Audi