Saudi Real Estate registered an Increase in Villa Prices and Over 20% Rise in Office Rents | Kanebridge News
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Saudi Real Estate registered an Increase in Villa Prices and Over 20% Rise in Office Rents

Wed, Feb 28, 2024 4:17pmGrey Clock 3 min

The Saudi Arabian real estate sector concluded year 2023 with an expanding trend in villa prices across major cities, alongside a significant increase in office rental rates, as per a CBRE analysis.

Despite varying performances across different cities and real estate categories, CBRE anticipated continued strong results throughout the year. This varied performance is exemplified by a 63.7% surge in residential real estate transactions in Riyadh, compared with a 23.4% decrease in Dammam.

Within the residential sector, Riyadh experienced a 63.7% boost in transaction volumes compared to the previous year’s same quarter. Jeddah saw a 23.4% rise, whereas Dammam faced a 23.4% reduction in transaction volumes. Most major cities in Saudi Arabia reported growth in average apartment prices, with increases of 10.7%, 1.8%, and 2% in Riyadh, Dammam, and Khobar, respectively, while Jeddah saw a 1.9% decrease in average apartment prices. The year leading to Q4 2023 witnessed a consistent rise in villa prices across all principal cities monitored, with average increases of 5.5%, 4.8%, 0.3%, and 1.1% in Riyadh, Jeddah, Dammam, and Khobar, respectively.

In the office sector, Riyadh reported rent increases across all grades in the 12 months leading to Q4 2023, with prime rent soaring by 20.7%. Both Grades A and B in the capital saw annual rent growths of 13% and 22.2%, respectively. Occupancy rates for Grade A reached full capacity with a 0.8% increase, while Grade B occupancy stood at 99.4%. In Jeddah, Grade A office rents climbed by 19.7%, with Grade B rents experiencing a modest 1% increase. Occupancy rates for Grade A and B offices in Jeddah escalated to 92.5% and 82.1%, respectively. The Eastern Province’s office markets in Dammam and Khobar saw Grade A rents rise by 7.4% and 7.2%, respectively, with occupancy rates for Grade A at 84.2% and 83.6% as of Q4 2023, and Grade B office occupancy in Dammam at 71.6%.

The hospitality sector in Saudi Arabia generally surpassed its 2019 performance benchmarks. For the entire year of 2023, compared to 2019, the kingdom’s average occupancy rate increased by 3.5 percentage points, with the average daily rate (ADR) rising by 12.3%, leading to an 18.9% hike in revenue per available room (RevPAR). City-specific data for 2023 showed Riyadh’s average occupancy rate grew by 3.1 percentage points, its ADR by 17.5%, resulting in a 23.5% RevPAR increase. Jeddah witnessed a 7%-point increase in occupancy levels and a 0.4% ADR growth, culminating in a 12.9% RevPAR growth. Both Makkah and Madinah continued their positive performance, with occupancy increases of 3.9 and 5.6 percentage points, respectively, and ADR growths of 21.9% and 35.3%, leading to RevPAR increases of 29.8% and 46.6%. In Khobar, occupancy rates grew by 7.5 percentage points, despite a 5% ADR decline, resulting in an 8.1% RevPAR improvement. Dammam saw a 7.5 percentage point rise in occupancy and a 1.6% ADR decrease, leading to a 13.1% RevPAR increase.

The industrial real estate sector, in Q4 2023, reflected the ongoing structural and operational reforms by the Ministry of Transportation and Logistics Services, aimed at transforming the industrial and logistics sector. The introduction of 28 new cargo services and enhancements in container handling under the Saudi Ports Authority (MAWANI) elevated Saudi Arabia to the 16th spot in the Lloyds List One Hundred rankings. These structural changes, combined with limited supply, resulted in average industrial and logistics rent increases of 17.6%, 17.8%, 11.3%, and 6.6% in Riyadh, Khobar, Dammam, and Jeddah, respectively, by the year-end.

Looking ahead to 2024, Taimur Khan, Head of Research – MENA at CBRE, commented on the persistent significant demand outpacing supply across almost all real estate market sectors in Saudi Arabia. Despite some economic challenges, the market showed strong performance in 2023. Khan predicts that while supply in many sectors is expected to rise in 2024, it will likely continue to fall short of demand, suggesting that the market will maintain its robust performance throughout the year.



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UAE Residential Market Review Shows Strong Growth and Record Transactions in Q1 2024

The total transaction volume in Abu Dhabi for the first quarter of the year reached 2,795.

Thu, May 16, 2024 4 min

The CBRE Middle East, a global leader in commercial real estate services and investments, released its latest edition of the UAE Residential Market Review for the first quarter of 2024.

Abu Dhabi Market Overview

During the first quarter of the year, the total volume of transactions in Abu Dhabi stood at 2,795, registering a 22.6% increase compared to the year prior. This increase has been underpinned by an 18.1% rise in off-plan sales and a 34.5% rise in secondary market sales. In the year to Q1 2024, Abu Dhabi’s average apartment and villa prices increased by 4.3% and 2.3%, respectively.

Abu Dhabi’s rental market witnessed a total of 46,130 residential rental contracts in Q1 2024, registering a decline of 10.9% from the year prior. This has been due to a 15.5% decline in the number of renewed rental contracts registered and a 2.4% drop in new rental registrations over the same period. In the year to Q1 2024, average apartment and villa rents have increased by 4.5% and 1.1%, respectively. On the supply front, only 80 units have been delivered in Abu Dhabi in the first three months of the year, with all of this new stock being in Al Raha Beach. An additional 8,660 units are expected to be completed by year-end with 55.8% of this scheduled stock located in Yas Island, Al Sowwah, and Al Shamkha.

Dubai Market Insights

In Dubai, price growth has continued to accelerate during the first quarter of 2024, with average prices increasing by 20.7% in the year to March 2024. Throughout this period, average apartment and villa prices increased by 20.4% and 22.1%, respectively. Although headline average sales rates are still marginally below the 2014 highs by 0.1%, several prominent residential neighbourhoods have already surpassed their 2014 figures.

As of March 2024, average apartment prices stood at AED 1,486 per square foot, and average villa prices reached AED 1,776 per square foot. Average villa sales rates are currently above their 2014 baseline by 22.9%. Rental growth has also gained momentum in 2024, after a period of moderation in 2023. In March 2024, average residential rents registered a year-on-year increase of 21.2%, up from the 20.4% growth registered a month earlier. Over this period, average apartment and villa rental rates grew by 22.1% and 14.5%, respectively. Data from the Dubai Land Department revealed that, in the year to date to March 2024, the total number of rental registrations stood at 159,941, marking an increase of 5.8% from the previous year. As for supply, a total of 6,526 units were delivered in the first quarter of the year, with 59.7% of this supply being located in Meydan One, Jumeirah Village Circle, and Al Furjan. A further 46,086 are expected to be handed over the remainder of the year. However, given historic materialisation rates, the report expects that a limited portion of this upcoming stock will come online as planned.

Record-Breaking Transactions

March 2024 witnessed another record in Dubai’s residential market, with transaction volumes reaching the highest monthly figure on record, marking a year-on-year growth of 13.2%. Throughout this period, off-plan sales and secondary market sales increased by 20.2%, and secondary market sales increased by 2.2%.

In the first quarter of 2024, Dubai’s total transaction volumes reached 35,310. This is the highest total ever recorded in the first quarter of the year, marking an increase of 20.5% from the year prior. Over this period, off-plan transactions recorded an increase of 23.9%, and secondary market transactions rose by 15.2%.

However, in Q1 2024, the total number of sales transactions within the prime market segment registered a decline of 2.1% compared to the year prior. Throughout this period, super-prime transactions recorded a drop of 16.5% year-on-year to stand at a total of 227. These declines witnessed in both markets have been largely underpinned by significant declines in off-plan sales largely attributable to the high levels of demand for off-plan properties and the limited level of upcoming supply. In terms of performance, in the first quarter of 2024, average prime prices registered a year-on-year increase of 16.0%, standing at an average of AED 4,661 per square foot, and average super-prime prices grew by 14.8% over this period, reaching AED 4,978 per square foot.

Taimur Khan, CBRE’s Head of Research MENA in Dubai

Future Projections 

Looking ahead, CBRE expects Dubai’s residential sales market to maintain its upward trajectory. Prices in both the apartment and villa segments of the market will continue to grow, however, not at the same pace. On the rental front, we forecast that residential rents will continue to increase. That being said, the rate of growth will likely moderate.

Taimur Khan, CBRE’s Head of Research MENA in Dubai, comments: “The UAE’s residential market started the year on a relatively strong note, where the elevated demand levels continue to drive performance. The strong levels of activity and high absorption levels, which have reduced available supply, will continue to support price growth in both Abu Dhabi and Dubai over the remainder of the year. In terms of rental growth, we expect that rental rates in Abu Dhabi will continue to rise, with prime areas set to outperform the market. In Dubai, residential rents will continue to increase; however, not at the same rate that we have been seeing to date, and we expect that the rate of change will diminish in the second half of the year.”

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