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Saudi Arabia: Villa prices rally in major cities while office rents continue to record strong growth rates in 2023

Demand for real estate in Saudi Arabia outpaced the available supply in 2023, resulting in rising costs for both home ownership and office leasing

Saudi Arabia real estate market review 2023: Demand outpaces supply, prices surge

According to a report by CBRE, the demand for real estate in Saudi Arabia in 2023 far exceeded the available supply, leading to increased costs for both home ownership and office leasing. In Riyadh, average office rents for Grade A and B units grew by 13% to 22.2% in the 12-month period, while occupancy rates were at a high of 99.4% to 100%. Villa prices saw a rise of up to 5.5%, and flat prices increased by as much as 10.7% during the same timeframe.

The consultancy firm’s ‘Saudi Arabia Real Estate Market Review’ for Q4 2023 also noted that during the last three months of the year alone, villa prices rallied in major cities in the kingdom, while residential property transactions surged by 63.7% compared to the same period in 2022.

“On the whole, demand in Saudi Arabia continues to outpace supply across almost all real estate market sectors, hence we have seen relatively strong levels of performance in 2023 despite some headline economic headwinds,” mentions Taimur Khan, Head of Research – MENA at CBRE.

The level of supply in Saudi’s real estate market will continue to lag demand this year despite the expected delivery of new units, Khan noted, so the market will continue to post robust performance throughout the year.

Office rents                                 

In the 12 months to the fourth quarter of 2023, rents across all office grades in Riyadh went up, with average Prime units posting a 20.7% increase and Grades A and B units rising by 13% and 22.2%, respectively.

The Saudi capital started seeing significant demand towards the end of the year. In the King Abdullah Financial District (KAFD), there was higher demand from national and international tenants, with an estimated 65% of space being leased to date. 

During the last quarter, other markets outside the Saudi capital also saw strong demand, with Grade A office rents in Jeddah rising by 19.7%. Grade B rents were slightly up by 1%, while occupancy rates for both Grade A and Grade B offices in Jeddah went up as well to reach 92.5% and 82.1%, respectively.

In the Eastern Province, Dammam and Khobar saw Grade A office rents rising by 7.4% and 7.2%, respectively while Grade A units in Dammam and Khobar were also nearly full at 84.2% and 83.6% occupancy, respectively.

Residential sector

Residential transaction volumes in Riyadh totalled 21,200 in Q4 2023, increasing by 63.7%
compared to the same quarter in 2022. During this period, the total value of these transactions reached $5.994 billion (SAR 22.2 billion). In Jeddah we saw a total value of SAR 11.3 billion transact in Q4 2023 across 6,692, representing an increase of 23.4% in terms of transaction volumes. Dammam demonstrated a decline in its residential transactions volumes, where in the year to Q4 2023 these fell by 23.4% to 2,341. The total value of these transactions in this period stood at $ 0.621 billion (SAR 2.3 billion).

In the 12 months to Q4 2023, the villa segment in Saudi Arabia demonstrated uniform growth across all key tracked cities. Within the villa segment, Riyadh, Jeddah, Dammam and Khobar posted average price increases of 5.5%, 4.8%, 0.3% and 1.1%, respectively in the 12 months to Q4 2023.

Over the same period, average apartment prices in Riyadh, Dammam and Khobar rose by 10.7%, 1.8% and 2%, respectively. However, in Jeddah, prices for flats dipped by 1.9%.