Beruflich Dokumente
Kultur Dokumente
on point .
Riyadh City Profile – December 2010
Further Opportunities in
Residential Market
The Riyadh real estate market continues to experience rapid growth due to:
• Government initiatives to open up the market and attract foreign investment
• Increased government spending on infrastructure which has attracted
private sector investment
• Development of further Educational and Health facilities
• Strong demand from end users including Government agencies and
private groups in the banking and telecoms sectors.
The residential sector remains in the upswing of the market cycle, with
results from the 2010 census revealing that population growth has been
more robust than expected. The increased number of low income
expatriates and other demographic shifts are further exacerbating the
shortage of affordable housing in Riyadh.
Other sectors of the real estate market are currently experiencing falls in
average rentals and performance as the office, retail and hotel sectors are
becoming more competitive in the light of recent additions to supply. This
is creating more favourable conditions for tenants or visitors in these
sectors of the market.
R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:29 Page 2
Section Heading
Economic and Demographic Overview
25
construction and related workers. Given the high government spending
20 planned over the next few years (expenditure of US$ 385 billion is contained
in the 2010-2014 five-year development plan) further growth in the expatriate
15 population can be expected.
10 A greater expatriate male population than was previously estimated means
the overall market size for many goods and services may have been
5
underestimated. Growth in demand for accommodation, goods and services
0 to serve this generally low-income section of the population will be
1992 2004 2010 2020
particularly strong over the next few years.
Saudi Non-Saudi
Source: Source: CDS, Jadwa, Jones Lang LaSalle
R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:29 Page 3
5
development corridor to the north of Riyadh. Development of University and
2.5
4
Prince Salman Road (Second Ring Road) has increased the land values in
2.0 Malaqa, Yasmin and Nurjis District. Yasmin and Malaqa especially have seen
3 high levels of interest in developing residential developments for Saudi families.
1.5
Prices of houses in those districts have increased 10% to 15% in the quarter.
2
1.0
Property Clock
1 0.5 There is currently significant variation between sectors in terms of their
0 0.0 position on their respective market cycles in Riyadh.
1992 2004 2010 2020
Residential: The residential market is experiencing moderate increases in rents
Residential Units (million) Annual Population Growth
and prices on the strength of recovering confidence and a return to economic
Source: CDS, Jadwa, Jones Lang LaSalle
growth. Rents have been more robust than sale prices over the last quarter.
Bank lending to the private sector picked up in both monthly and year-on- Office: Demand is strong and few new projects are being launched. After
year terms in September but absolute additions of credit remain small. Bank recent declines rents should stabilise before the ‘supply shock’ of the mega
deposits also rose, pushing money supply growth to an eight-month high. projects hits the market.
Government: The focus of the 2010 budget remains on capital expenditure. Retail: Increasing retail sales and the introduction of new brands to Saudi Arabia
Out of SAR 540 billion, around SAR 260 billion or 48% has been allocated mean that popular locations are starting to increase rents. However, many malls
for capital expenditure in the 2010 budget, around 16% higher than in 2009. are still struggling and will need to be repositioned before rents can increase.
This commitment is evidenced by 652 contracts worth SAR 40 billion being Hotels: Demand continues to improve and the market has performed in line
awarded for infrastructure projects in the first four months of 2010. with 2009 conditions over the past six months. The growing pipeline of new
While continuing to allocate resources to infrastructure, the budget also rooms is likely to increase competitive pressures in 2011/2012.
prioritizes spending in social sectors, namely education and health. This is a
positive factor given the need to upgrade the quality of education and health
Riyadh Property Clock Q4 2010
services in the Kingdom.
Hotel
Construction: Increased government spending in key infrastructure projects
throughout 2009 has paved the way for the construction sector’s strong
recovery. In 2010, the sector’s real GDP is forecast to grow by 6% year-on-
year, amounting to SAR 64 billion. The construction sector’s share of non-oil
GDP is forecast to reach more than 10% in 2010. The expansion of the Rental Growth
Rents Falling
sector is evident in the rising labour force, expected to reach 2.75 million Slowing
workers by the end of 2010, a 5% rise on the previous year. Total
expenditure in the Saudi construction sector, as measured by the level of
gross fixed capital formation (GFCF), is expected to reach SAR 188 billion
in 2010, a rise of 13% from the previous year.
Rental Growth Rents Bottoming
Manufacturing: In the first half of 2010, the manufacturing sector posted strong Accelerating Out
GDP growth of 10.4%, due in part to increased output of cement and other
building material industries that are benefiting from high construction spending.
Inflation: Inflation has continued its upward trend, reaching 5.8% in October Office
2010, lower than the 27-year peak of 11% posted in July 2008, but still Residential
significantly higher than the historical inflation rate of 1-2%. Residential Retail
rentals have been the dominant source of inflationary pressures registering Source: Jones Lang LaSalle
an annual increase of 9.4%. Inflationary pressure from food prices – Note: The property clock is a way of locating the relative position of the different sectors within their short-term
particularly global wheat prices is on the rise, having climbed to a 22 month prime rental cycles. Asset classes can move around the clock at different speeds and directions.
high of 8.3% in October. Hotels position on the clock represents the RevPAR rather than rents which is calculated as Occupancy x ADR.
R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:30 Page 4
Office Market
Supply Demand
200,000 sq m of new office space will be completed in Riyadh in 2010 and we What is impressive in 2010 is that so much of the new supply is being
expect a similar amount in 2011. Most of this new supply remains clustered in absorbed. Al Bayt 19, Al Bayt 52, Riyadh Business Gate, Canary Centre, all
the CBD and central districts, although there are now several new office buildings secured substantial leasing commitments.
in a cluster emerging at the intersection of Olaya and the North Ring Road. The government was the largest source of demand and a lease by the
Ministry of Justice for 24,000 sq m is the largest deal of the year in 2010.
Anticipated Future Supply – Major Projects Several new single user buildings have also been developed for Ministries
such as Defence and Education.
Projects GLA (sq m)
Buoyant multinational demand is being driven by four factors:
Dabab Centre (2010) 19,000 1. Increased headcount due to growing local market
Al-Bayt 52 (2010) 32,000 2. Market entry / start-up offices
3. Restructuring of license arrangements with JV partners
Platinum 2 (2011) 15,000
4. Trading up to new buildings that are compliant with corporate space
Al Munajem Tower (2011) 17,000 standards
©Mick 10 Panoramio
Performance Market Outlook
Strong local demand has kept the vacancy levels at around 10%, despite the Demand is expected to remain high on the back of strong oil prices and
significant level of additional supply brought to the market during 2010. government spending. Few new projects are being launched although the
pipeline is still full. After recent declines rents should stabilise before the
Rentals have declined across the market during 2010, with the greatest falls
‘supply shock’ of the mega projects hits the market in 2013.
being experienced for buildings outside of the CBD, older buildings and those
where landlords are seeking to lease the whole building to a single tenant.
Average rents for Grade A buildings currently vary from SAR 1,000 to SAR
1,500 with the rental range for Grade B buildings having reduced further to
between SAR 600 and 850.
160,000
Space Available for Lease (GLA/sq m)
140,000 1,100
Average Rent (SAR/sq m)
120,000
100,000 900
80,000
60,000 700
40,000
20,000 500
King Eastern Olaya Siteen St Arouba Tahlia and
Fahd Ring Road Dabab St
Space Available for Lease Average Rent
Source: Jones Lang LaSalle
R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:31 Page 6
Residential Market
Supply Demand
Riyadh has a total stock of housing estimated at 930,000 units. Census Saudi population growth, increased expatriate arrivals and higher immigration
results are not yet released at the city level, but it is likely that the average into the city for employment or education are driving demand and creating
annual supply will prove to be above the 30,000 previously estimated by the further opportunities across many different segments of the residential market.
Ministry of Economy and Planning. The absence of reliable data about
Much of the proposed supply has however not been well targeted to specific
housing completions makes it difficult for lenders, investors and developers
market segments and developers have consequently delayed plans for many
to make investments in new housing, and micro-builders therefore continue
apartment projects in secondary locations due to restricted levels of interest
to drive the market.
and demand. Due to cultural reasons, most Saudis still seek an independent
Large projects such as Al Wasl, Ajmakan and Shaams Al-ARiyadh have not villa and the market for apartment projects in Riyadh has therefore been
delivered any units during 2010 and progress on these developments is very largely supported by expatriate end-users, employers or investors looking to
slow. Medium size projects like Blncyah, Manzel Al-Qurtaba, Canary, Al-Bayt purchase a whole building for leasing or resale.
32, Memar Yasmeen and Sindad have, however, delivered over 950 new Developers are starting to shift their focus to ‘mid-market’ single family
villas in recent months. dwellings that can be accepted by both Saudi and expatriate buyers. This
Tight construction credit and regulations restricting sales until infrastructure category will enable the volumes to develop large tracts of land, but scale
has been completed have discouraged the development of large communities, also creates absorption risks for developers.
as few players have the funds to develop the infrastructure on land parcels Duplexes are emerging as an increasingly popular product type for a population
of one million sq m. Some developers have funds committed to incomplete that does not like to be in an apartment and can not afford a villa. Most of
projects where partial infrastructure has been developed. The lack of the transactions in the duplex segment are currently in the SAR 750,000 to
additional financing is resulting in developers being unable to complete the SAR 900,000 range.
infrastructure and start the construction of such projects. Expatriates comprise an increasing portion of buyers in the Riyadh residential
Rabiah is the only major new residential project announced in recent months. market, representing between 15-50% of purchasers within projects currently
Most new projects are small scale, reflecting the piecemeal nature of the being marketed. Although Arab and Asian expats account for the majority of
development industry with most developers unable to finance major new projects. houses purchased this year, few developers are looking into the preferences
of expatriates in terms of design, floor plan or amenities offered. As much
Nismat-Ar-Riyadh by the Thabat JV is the first significant residential project as 90% of expatriate buyers have purchased property through some kind of
in Riyadh to obtain permission under the new escrow laws for off-plan sales. loan or mortgage facility.
The government has appointed a consultant to monitor the progress of the
The package of mortgage laws that has been discussed since 2007 remains
project and to ensure the reinvestment of sales receipts. The market will be
under review, although this has not stopped development of the home finance
watching with keen interest to see if Thabat is successful with this new
sector. The Deutsche Gulf JV is expanding its lending activities and the
approach to sales and marketing.
Public Pension Agency has started a home loan program.
The government is working to increase the supply of housing for all
segments of the population in Riyadh. MODON has recently awarded two
contracts to build accommodation for blue and white collar employees in
industrial cities and has also approved seven licenses for new expatriate
compounds aimed at the increasing population of professional expatriates.
Charity organizations (e.g. King Abdullah Housing Development Foundation
for His Parents, Prince Sultan Foundation for Philanthropic Projects and
Prince Salman Foundation for Philanthropic Housing) are also working to
increase the stock of affordable housing.
R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:31 Page 7
3,000
Anticipated Future Supply – Major Projects
Projects Units 2,000
Malaqa
Khuzama
Nakheel
Raudah
Sahafa
Shifa
Retail Market
Supply Demand
The total stock of retail space in Riyadh is estimated to be around 2.7 million Consumer confidence and spending levels have continued to increase since
sq m (across all formats). As the city continues to expand, the stock of retail Ramadan. According to data from SAMA, the value of point of sale
space is expected to increase to over 3 million sq m by 2014. transactions has reached its highest ever level, increasing by 28% in Q3 2010
compared to Q3 2009.
The Riyadh retail market has witnessed a major expansion this year, with
almost 400,000 sq m being added to the existing stock. The West and South Reflecting this increased sales and spending, demand from retailers remains
regions have experienced the majority of new development in projects such strong. Many retailers have expanded during the third quarter. Medas
as Panorama Mall (81,008), Souq Al Sharq (130,000), Bilda Centre (50,000), Furnishers, Paind’or, SACO and Extra are examples of regional retailers that
Hamra Al-Sharq (78,895) and Al-Haram Plaza. have taken additional premises in Riyadh. Lulu supermarket has opened its
first outlet in the city (near exit 16) and has also rented the space for its
Due to non-availability of large parcels and high land prices in more central
second store that will open next year.
locations, the focus of new retail development has been in peripheral areas
of Riyadh. A major retail destination is developing around exit 16-17 on the The market has also seen the emergence of large stand alone retailers,
ring road to the south of Riyadh, building upon the opening of IKEA and the taking freestanding stores. Major local chains that have opened new stores
Rimal Centre in that location in 2007. close to junction 16 of the Riyadh ring road include SACO, Extra, Electro and
Othaim supermarket.
2010 represents the peak in the current supply pipeline, with more limited
levels of new retail supply expected to enter the Riyadh market over the next There has also been an expansion of small retailers, with more than 4,000 sq m
2 to 3 years. of retail space being preleased by furnishers, carpet and other accessory
stores in Souq Al Sharq.
Anticipated Future Supply – Major Projects
Following the withdrawal of Carrefour and many other existing tenants from
Projects GLA (sq m) Le Mall project, the centre has been rebranded as “China Souq”. The owners
have managed to lease most of the 30,000 sq m of retail space, creating the
Al-Jazeera (2011) 8,700
first Chinese market of its kind in Riyadh.
Lulu Hypemarket (2011) 20,000
Retail Rentals
3,500
3,000
2,500
Average Rents (SAR/sq m)
2,000
1,500
1,000
500
0
Anchor Line Shops Restaurants Entertainment Area
Q2 2010 Q4 2010
Source: Jones Lang LaSalle
R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:31 Page 10
Hotel Market
Supply Demand
Data from the Tourism Information and Research Centre (MAS) shows Riyadh The quality hotel segment in Riyadh is driven primarily by business travellers
had 9,007 hotel rooms at end of 2009. Riyadh represents 8.8% of the overall and corporate guests. According to MAS, Riyadh ranks as the most visited
Saudi Arabia hotel market, trailing other regions like Makkah and Madinah. city for business purposes in Saudi Arabia.
The four and five star segments together account for approximately 40% of Demand from government bodies also forms a significant portion of the
the overall room supply in the city and a large proportion of this is within demand for room nights in the city. The general revival in global business and
internationally branded hotels. The MAS has recently introduced a revised trade in 2011 and the planned increase in government spending, will positively
grading system for hotels and has de-classified several properties, impact hotel room night demand in Riyadh driving up occupancy levels.
downgrading them due to their inability to meet the required standards.
Domestic business guests comprise about 65% of the overall room night
There has been no addition to the inventory of hotel rooms in Riyadh in 2010 demand in Riyadh. The city does not currently attract a significant volume of
to date. The end of this year will see the expansion of the Rosewood Hotel leisure visitors. The tourism authorities are attempting to boost leisure
at Al Faisaliyah which will add another 106 rooms (as part of its south wing) demand by increasing the city’s tourism offering. Such moves received a
to the market, increasing the hotel’s total inventory to 330 rooms. major boost earlier in 2010 with the Al Turaif district in Al Diryah area being
designated as a UNESCO World Heritage Site.
The supply pipeline will see a significant level of new hotel rooms added to
the market over the next two years, with most of this being in branded hotels.
Anticipated Future Supply – Major Hotel Projects
The bulk of the future supply is concentrated along the existing hub of King
Fahd Road and Olaya Street within the CBD, although there are also hotel Projects Year Rating Rooms
properties in a number of the major suburban projects such as King Abdullah
Aloft Riyadh 2011 3 225
Financial District, Granada Centre and Riyadh Business Gate. Several of the
projects planned for next year have now been delayed to 2012-2013 in the light Diplomat Makarem Hotel 2011 3 275
of more competitive market conditions and restrictions on project financing.
Crowne Plaza Olaya District 2011 4 308
There are also a number of furnished apartment projects under construction
for various chains, with developers seeking to tap into this new market sector Rosewood Durrat Al Riyadh 2012 5 190
which is emerging as the preferred accommodation type for domestic visitors Wyndham KAFD 2012 5 210
to Riyadh. With strong demand for furnished apartments being experienced
from overseas visitors, the upscale branded serviced apartment sector is Park Inn Olaya 2012 3 259
also expected to undergo significant expansion in Riyadh. Notable extended Crowne Plaza ITCC 2012 5 326
stay projects currently under construction include the 106 key Staybridge
Suites Olaya (2011), Boudl Olaya & Tahilia with 200 apartment units (2012) Ritz Carlton 2013 5 140
as well as a 119 unit Marriott Executive Apartments (2011). Movenpick 2013 5 300
the first half of 2010, however the third quarter experienced the normal
Occupancy %
70.0%
seasonal decline in performance associated with Ramadan and the summer 400
holiday period. 60.0%
300
50.0%
200
100 40.0%
0 30.0%
2005 2006 2007 2008 2009 2010YTD
RevPAR Occupancy
*2010 YTD - data up to September 2010, Source: STR and Jones Lang LaSalle Hotels
To find how Jones Lang LaSalle can assist in making real estate decisions in Saudi Arabia, please contact:
Authors:
www.joneslanglasalle-mena.com