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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.

Development of the King Abdullah Financial District and Princess Noura


Bint Abdulrahman University is shifting the centre of gravity northwards.

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.
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on.point • Riyadh City Profile • December 2010 2

Section Heading
Economic and Demographic Overview

Census – Preliminary Results


Preliminary results from the 2010 census show the Kingdom’s population at 27.1 Growth in the national population was slower than anticipated by the
million, well above the official estimate for mid 2009, of 25.4 million. This increase government. The 2010 census shows a total of 18.7 million Saudi nationals.
reflects a far greater expatriate population than had previously been assumed. The population of Saudi nationals increased by just 2.1% pa between 2004
and 2010, compared to a 3.0% growth in the total population.
Between 2004 and 2010, the number of Saudi nationals rose by 19%, while
the number of expatriates increased by 38%. An analysis by Jadwa Investment The slowdown in the growth of the local population has important
forecasts that if this growth rate is maintained over the next decade, the implications for government policy. The growth of the Saudi national
Kingdom’s population will increase to 37.2 million by 2020 with the proportion population has fallen significantly in recent years. At the time of the oil boom
of Saudi nationals falling from 70% to 61% over the next 10 years. of the mid-1970s, the national population was growing at 4.2% per year;
twice the level of the past six years. National population growth remained
Key Statistics rapid through the 1990s, during which it averaged 2.8% per year.
The population growth and a declining household size have contributed to a
Indicator 2010E 2011F significant housing shortage across the Kingdom. Annual growth of
Population (millions) 27.1 27.9 population (3.04%) during 2004 and 2010 was greater than the annual
growth (2.56%) in residential units for the same period. This gap is expected
Nominal GDP (billion US$) 427.0 461.8 to grow further over the coming decade, driven in part by a continued decline
Real GDP Growth 3.9% 4.5% in average household size.
The jump in the number of expatriates is well above what was previously
Oil Export Revenues (billion US$) 191 197
estimated by the Central Department of Statistics and Information. Its mid-
Inflation 5.3% 4.2% 2009 estimate of 6.8 million was based on an assumed growth of 2.1% pa
since the 2004 census. The expatriate population actually grew by an annual
GDP Per Capita (US$) 15,734 16,531
average of 5.4% since 2004.
Real Non-Oil GDP Growth 4.7% 5.2% Despite the surge in the expatriate population, we expect the census data
still underestimates the actual numbers. For example, those expatriates that
Budget Surplus (Billion US$) 13 11
have remained in the Kingdom after their visas have expired are likely to
Source: Jadwa, SAMA, IMF and Jones Lang LaSalle
have shied away from census data collectors.
Males account for over 70% of expatriates, a reflection that few are
KSA Population 1992-2020
40
accompanied by their families. It is likely that the bulk of the 2.5 million
expatriate women are domestic workers.
35
From just 11% in 1974, the proportion of non-Saudis has grown to 31% of
30 the population in 2010. Much of this jump is related to the huge increase in
government investment spending, which requires large numbers of
Total Population (millions)

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
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on.point • Riyadh City Profile • December 2010 3

Spending Led Economic Recovery Investing in Education


An expansionary fiscal policy remains the main growth driver, supporting Princess Noura Bint Abdulrahman University
investment and consumption through infrastructure and social transfers. The largest women-only university in the Arab World will be located in Riyadh
on a land parcel of 8 million sq m. With a built up area of almost 3 million
Quarterly data on economic growth has been published for the first time in
sq m it will have a capacity for 40,000 students.
the Kingdom in Q2/2010. Oil was by far the fastest growing sector of the
economy, though the rate of growth in this sector reduced from 68% This project includes 14 colleges, research and medical centres. It is also
(nominal terms) in Q1 to 24% in Q2 but it is still highest among all other expected to add more than 8,000 residential units that will be divided into
sectors. In comparison, growth in the non-oil private sector slipped from 6.7% housing for senior staff (400 villas), junior staff (1,000 apartments) and
in the first quarter to 6.2% in the second quarter. student housing (7,000).
This project is expected to be completed by 2012. It will not only be a new
Residential Units and Population Growth 1992-2020 chapter in women’s education in Riyadh but also a major iconic development
7 4.0 on the map of Riyadh. Over the coming years there will also be significant
levels of development on sites surrounding the university. These include the
3.5
6 King Abdullah Centre for Petroleum Studies, cluster of Government offices
and medical facilities for Defence Ministry that will further strengthen the
Population Growth % per annum
3.0
Residential Units (million)

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.
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on.point • Riyadh City Profile • December 2010 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

Al Anoud 2 (2011) 17,500 Multinational Leasing Activity in 2010


Waseel Tower (2011) 33,000 Lessee Area (sq m)
Home Office (2011) 50,000 GE (Health) 1,300
Riyadh Business Gate (2011) 105,000 Juniper Networks 1,300
Tamkeen Tower (2012) 45,775 Aegis (Essar Group) 1,500
Olaya Towers (2012) 80,000 MSD (Merck) 1,680
Granada Business Park (2012) 133,600 Siemens 9,000
King Abdullah Financial District Ph1 (2013+) 750,000 There has also been a number of private sector leases signed for between
Source: Jones Lang LaSalle 500 to 1,000 sq m, including: Lessee
While supply has been substantial, a large proportion of this new supply Barclays 500
does not meet typical corporate requirements for safety or parking. As many
Servcorp 500
of the empty lots in the CBD are filled in by development, access to parking
is becoming an ever increasing challenge for occupiers with large proportions IBM 600
of staff who drive to work.
SAP 750
Office development is increasing in the suburbs and will offer tenants a
solution to their parking challenges, and we expect employment to follow. JP Morgan 800
Projects such as Riyadh Business Gate, Tamkeen Tower, and Granada Business
The private sector tenants generating the most demand include defence/
Park will all offer parking ratios superior to most buildings in the CBD.
security, pharma/health, engineering and IT.
Several of the towers of the King Abdullah Financial District are now
emerging. There are 30 plots being developed by the Public Pension Agency
in addition to towers for Samba, SAMA, CMA and Tadawul. Substantial
infrastructure in terms of power, district cooling, IT network and a monorail
system still needs to be put in place and we expect tenants will be able to
target occupation for 2013. Lease negotiations with the various landlords
should be possible from next year.
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©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.

Office Rents & Space Available for Lease


180,000 1,300

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
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on.point • Riyadh City Profile • December 2010 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.
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Performance Market Outlook


While performance has been mixed, the overall trend is one of increasing We expect to see more professional developers enter the Riyadh housing
prices in the villa market with some projects experiencing sales of villas at market in 2011-2012, although high land prices are proving to be a challenge
prices of 10-15% higher than those achieved early in 2010. for many interested investors and developers. There should be cyclical
Prices in the apartment sector have been typically stable, although some support for further increases in residential prices and rents during 2011.
projects in the north such as Malaqa and Yasmin have seen a marginal (up Landlords are aware of shortages of rental supply in some prime districts
to 5%) uplift since early 2010. Most apartments to the south and west of the and are asking for rental increases. In the absence of rental caps; conditions
city are still trading at the same pricing levels seen earlier in 2010. are expected to remain landlord favourable and some increase in rental levels
In contrast, the rental sector has seen more demand for apartments could be experienced during 2011. The sectors most likely to witness this
compared to villas. Due to low affordability, most of the expatriates in Riyadh growth are mid-market apartments and expatriate residential compounds.
are living in apartments. Apartment rents in Riyadh have increased about
10% while villa rents have increased just 5% since early 2010. Given the Villa Prices by District – Riyadh
reluctance of Saudi nationals towards living in apartments, this sector
6,000
remains more focused on rentals to expatriates rather than sales.
There remains strong demand for expatriate compounds at the upper end of
5,000
the market. Due to the life style offered, most existing compounds are
experiencing 100% occupancy and rents are increasing by 10%-15% per year.
There is increased interest from corporate customers to rent entire compounds 4,000
for their employees and this interest may further boost rental levels.
Price (SAR/sq m)

3,000
Anticipated Future Supply – Major Projects
Projects Units 2,000

Al Dar (2011) 135


1,000
Al-Ghorub (2012) 300

Al-Bayt 32 (2012) 400 0


Qurdoba
Mounsia
Yasmin

Malaqa
Khuzama

Nakheel

Raudah
Sahafa

Shifa

Al-Rabiah (2013) 506

Burj Rafal (2014) 416 District

Manzel Qurtaba (2014) 1,400 Source: SAMA, Jones Lang LaSalle

Shaams Al Riyadh (2014) 3,189

Nismat Riyadh (2014) 4,200


Source: Jones Lang LaSalle
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on.point • Riyadh City Profile • December 2010 8

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

Al Qasr Suwaidi Mall (2011) 80,000

Olaya Centre (2012) 8,000

Nismat-Retail (2014) 100,000


Source: Jones Lang LaSalle
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on.point • Riyadh City Profile • December 2010 9

Performance Market Outlook


Average rents remained unchanged over Q3 2010, halting the decline Given the large influx of new retail centres that will take some time for the
experienced in the previous quarter. This suggests the overall market is market to absorb and lease up, landlords need to be more innovative to retain
reaching some stability around the bottom of its cycle. anchor tenants who are benefiting from increased choice of locations. Rents
are likely to increase in the better quality centres that offer good access,
Malls in the CBD, especially those on King Abdullah Street attract the highest
covered parking and a strong mix of retail, leisure and entertainment
rents in the Riyadh market (between SAR 2,000 and SAR 2,800 sq m) and
retailers. For other centres, rental levels are likely to decline further in the
there has been little change in these levels over the past quarter.
face of better quality competition.
Rents have however continued to decline for poorer performing projects such
The supply pipeline is likely to be dominated by strip retail and standalone
as Bustan Centre, Akaria Retail and Sadhan Sulemania Square with many
centres in the short term. The lack of major new malls completing in 2011/
retailers having left these projects due to low footfall and poor property
2012 should provide the market with the opportunity to recover, although this
management. With landlords working to secure new tenants to these
may well also involve the withdrawal or conversion of some poorer quality
projects, rentals are likely to decline further and it is possible that some retail
retail centres.
space will be converted to office use in these malls.
Malls in secondary locations such as Gardenia, Flemingo, Sadhan Rabwa
and Rimal Centre are experiencing high vacancies (from 40% to 80%) and
are surviving on the performance of their anchor tenants. These centres are
finding it increasingly difficult to attract and retain branded speciality retailers,
given the increased choice of space now available to tenants in new and
better quality centres.

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
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on.point • Riyadh City Profile • December 2010 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

Rafal Tower Kempinski 2013 5 300

Granada Centre Hilton 2013 5 830


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on.point • Riyadh City Profile • December 2010 11

Performance Market Outlook


Following an upward trend in market performance between 2005-2008, the The market is likely to remain relatively stable at around current levels of
hotel market in Riyadh witnessed a significant decline in occupancies and performance in 2011 with serviced apartments expected to be the strongest
RevPAR in 2009 reflecting the impact of the global economic slowdown. This performing sector of the market. Significant additions to hotel room stock in
RevPAR contraction has continued in the first three quarters of 2010. Average 2012-2013 could potentially create a risk of oversupply in the medium term
occupancies have decreased to below 60% for the first time since the early
2000s and average rates have also fallen (after remaining largely unchanged
in 2009), leading to RevPAR figures plummeting by almost 11% in 2010. Hotel Performance – Riyadh
800 100.0%
The five star hotel segment (which includes properties such as the Four
Seasons, Rosewood, Intercontinental and Sheraton) has consistently 700 90.0%
outperformed the overall market in Riyadh, reflecting continued strong 600
80.0%
demand for this segment. The 5 star market remained relatively stable over
500
RevPar (SAR)

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

©The Four Seasons Hotel, Riyadh


R12744 Riyadh City Profile 12pp_JLL A4 Design Grid 08/12/2010 08:31 Page 12

Jones Lang LaSalle MENA Offices

Riyadh Jeddah Cairo Abu Dhabi Dubai


Abraj Atta’wuneya Jameel Square World Trade Centre Al Niyadi Building Emaar Square
South Tower, 18th Floor Level 4 Suite 406 19th Floor 10th Floor, Offices 1003/4 Building 1, Office 403
King Fahd Road Tahliya and Andalus Streets 1191 Corniche el Nil Street Airport Road Sheikh Zayed Road
Riyadh 11683 Jeddah 21511 Cairo PO Box 36788 PO Box 214029
Saudi Arabia Saudi Arabia Egypt Abu Dhabi, UAE Dubai, UAE
Tel: +966 1 218 0303 Tel: +966 2 660 2555 Tel: +2 02 25777 836 Tel: +971 2 443 7772 Tel: +971 4 426 6999
Fax: +966 1 218 0308 Fax: +966 2 669 4030 Fax: +2 02 25777 839 Fax: +971 2 443 7762 Fax: +971 4 365 3260

To find how Jones Lang LaSalle can assist in making real estate decisions in Saudi Arabia, please contact:

John Harris Soraka Al Khatib Deepak Jain Simon Brand


Co-Head Co-Head Head of Strategic Consulting Head of Valuations
john.harris@jll.com soraka.alkhatib@jll.com deepak.jain@jll.com simon.brand@jll.com

David Macadam Gaurav Shivpuri Chiheb Ben-Mahmoud


Retail Services Director – Capital Markets Hotel Services
david.macadam@jll.com gaurav.shivpuri@jll.com chiheb.ben-mahmoud@jll.com

Authors:

Fayyaz Ahmad Diyaa Ayoub Craig Plumb


Associate – Research Analyst – Research Head of Research – MENA
fayyaz.ahmad@jll.com diyaa.ayoub@jll.com craig.plumb@jll.com

www.joneslanglasalle-mena.com

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