The total amount of office space in Riyadh is expected to grow by 1 million square meters to 6.3 million square meters by the end of 2026, according to global property consultancy Knight Frank. Program HQ is among the main factors contributing to the rise in demand for office space in Riyadh, further influencing office lease rates. Notably, 517 companies have now committed to establishing their regional headquarters in the Kingdom, well ahead of the 2030 target of 480.
As a result, Riyadh has recorded the highest national increase in Grade A office lease rates over the last 12 months at 31 percent to around SAR2,604 per square meter, followed by 2.9 percent in Jeddah and 2.2 percent in the Dammam Metropolitan Area (DMA).
“Vision 2030 is reshaping Saudi Arabia’s economy and society, with a central focus on transforming Riyadh into a key regional and global center for business, finance, leisure, and tourism,” stated Faisal Durrani, partner and head of research, MENA.
Riyadh’s growing job market raises demand
Knight Frank says that 49 percent of all new jobs created in Saudi Arabia over the last five years have been in Riyadh. This growth is further adding to the upward pressure on office rents, with many key office districts and business parks fully leased, with waiting lists.
“The limited availability of office space is also forcing up Riyadh’s Grade B rents, which have climbed by 27 percent over the past year. Similarly, in the DMA region, Grade A rents have climbed by 2.2 percent since Q3 2023, fuelled mainly by strong demand from the public sector,” added Durrani.
Jeddah’s office market sees steady growth
Knight Frank’s analysis also revealed that Jeddah’s office market saw steady growth over the 12 months leading up to the end of Q3 2024, driven by rising office demand. This demand has impacted rents, with Grade A office rents increasing by 2.9 percent to SAR1,235 per square meter. Meanwhile, Grade B rents rose even faster, up by 3.8 percent to SAR810 per square meter from Q3 2023 to Q3 2024.
Occupancy in Grade A offices decreased slightly by 1 percentage point over this period, reaching 94 percent. In contrast, occupancy for Grade B spaces grew by 2 percentage points, reaching 90 percent.
Hospitality sector boost
Elsewhere, Makkah has drawn more than 1.83 million pilgrims to perform Hajj in 2024. Of these, 1.6 million arrived from outside the Kingdom. The new ‘Makkah Route Initiative’ is largely behind that surge, enhancing efficiency and convenience for pilgrims by allowing them to complete entry procedures at their home country’s airports. The program also facilitates pilgrims’ direct transfer to accommodations in one of the Holy Cities of Makkah and Madinah.
Rising room rates and limited supply have limited the growth of the program although the latter will begin reversing with a significant supply boost expected by 2030, led by the Jabal Omar Development (7,700 hotel rooms).
Riyadh’s accommodation costs surge
In Riyadh, the hospitality market has been showing a strong performance due to an ongoing increase in business travel, the start of major events like Riyadh Season, along the expansion of cultural and entertainment offerings in the city, which are together contributing to sharp improvement in the capital’s hospitality market. Average daily rates in Riyadh, for instance, grew by 19 percent to SAR847, while occupancy levels remained largely stable at 59.8 percent. This stability is likely tempered slightly by the sharp increase in ADR, according to Knight Frank.
“Last year, the Kingdom surpassed its 2030 target of attracting over 100 million visitors. And in the first half of 2024 alone, the number of visitors already crossed 60 million. Riyadh is tracking 6,688 hotel rooms currently under construction and due to be delivered by 2026. While this may suggest a potential future tapering in the rate of room rate increases, it is worth noting that just 11 percent of the future supply over the next two years will fall into the midscale and economy segments. This limited availability highlights a significant gap in affordable accommodation options within the capital,” stated Oussama El Kadiri, partner and head of hospitality, tourism & leisure advisory, MEA.
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