Riyadh’s retail space will grow by 28 percent to 4.6 million sqm by 2026 from the existing 3.6 million sqm in Q1 of 2024. The latest report from global property consultancy Knight Frank reveals that average rental rates across Riyadh’s retail market have increased marginally by 3 percent to SAR2,725 per square meter for both regional and super-regional malls in the last 12 months.
Meanwhile, occupancy rates across Riyadh’s retail market increased by 5 percentage points to 90 percent, according to the Summer 2024 Saudi Arabia Retail Market Overview.
“We are in the midst of a significant liberalization of Saudi Arabia’s entertainment sector as well, resulting in the development of new cinemas, concert halls, theme parks, and sports complexes, facilities. This transformation is reshaping the retail landscape while also making a substantial contribution to non-oil GDP growth,” says Faisal Durrani, Partner – Head of Research, MENA.
Jeddah and Dammam see slower growth
In contrast to Riyadh, Jeddah and the Dammam Metropolitan Area (DMA) have experienced lower retail market growth in the last 12 months with occupancy rates dropping by 1 percentage point in both cities, to 84 percent and 89 percent, respectively, says Knight Frank.
In addition, average rents in Jeddah have dropped by 7 percent to SAR2,465 per square meter, while DMA regional and super regional mall rental rates have witnessed a decline of 1.3 percent to SAR2,275 per square meter.
“Looking ahead, a further 100,000 sqm of space is likely to be completed in the capital this year, which while welcome news for consumers, shines a light on the importance for mall operators, developers, and retailers to double-down on experiential retail offerings in order to stay relevant and appealing,” added Durrani.
Read | Riyadh ranks among 15 fastest-growing cities in the world by 2033: Report
Economic diversification
Knight Frank’s report also points to the e-commerce market in Saudi Arabia, which expanded by 28 percent to SAR157 billion ($41.8 billion) in 2023. The report attributes this growth to an increase in internet penetration and smartphone usage, coupled with government support for digital retail infrastructure.
“The rapid adoption of digital payment methods and e-commerce platforms is reshaping the retail sector in Saudi Arabia,” stated Amar Hussain – Associate Partner, Research, ME.
Hussain added that retailers are increasingly investing in omnichannel strategies to integrate their online and offline operations, ensuring a seamless consumer experience. This digital transformation is essential for meeting the evolving preferences of consumers.
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