Saudi Real Estate: Surge in Residential Sales and Price Trends Across Major Cities

According to CBRE Saudi Arabia‘s Real Estate Market Review for the first quarter of 2024, the residential real estate sector has observed a substantial boost in property transactions.

Sales in Riyadh and Jeddah rose by 77% and 92.9% respectively, marking them as the top performing markets with the most notable price increments. The analysis by the real estate firm also highlighted trends such as increasing office rents, enhanced hotel occupancy, and higher industrial sector leases.

Residential Real Estate

In the residential sector, there is a sustained high demand in the major residential cities of Saudi Arabia.

The initial quarter of 2024 saw Riyadh’s sales transactions escalate by 77% year-on-year. During the same period, Jeddah and Dammam recorded rises in residential transactions by 92.9% and 28% respectively.

Average villa prices in Riyadh, Jeddah, and Khobar saw rises of 3.6%, 0.2%, and 3.1% year-on-year, while Dammam experienced a slight decline of 0.5% by Q1 2024.

In the apartment sector, average prices in Riyadh, Dammam, and Khobar increased by 8.4%, 0.9%, and 0.4%, respectively, compared to the previous year, whereas Jeddah saw a 1.1% decrease.

Taimur Khan, Head of Research CBRE MENA, said: “Whilst we have seen strong performance across commercial sectors within Saudi Arabia in the recent past, something which continues to date, we are now beginning to see the residential sector also register a significant surge in demand.

“This is in turn underpinning performance in the sector. As new stock continues to be delivered, we expect that this trend is likely to continue, with demand expect to outpace supply for some time to come, however we do also expect that there might be some bifurcation in performance within the residential sector, with new quality assets likely to register record rates.”

Office Real Estate

The office sector has seen a moderated growth in rental rates during the first quarter across all segments. Prime rents in Riyadh’s occupier market increased by 14.5% year-on-year.

Over the same period, average rents within the Grade A segment of the market saw an increase of 11.8%, and average Grade B rents registered a year-on-year increase of 10.3%. As of the first quarter of 2024, the average occupancy rate within the Prime, Grade A, and Grade B segments of the market stood at 93.8%, 99.7%, and 99.4%, respectively.

In the year to Q1 2024, in Dammam, average Grade A rents increased by 8%, and average Grade B rents grew by 6.2%. Over this period, Khobar’s Grade A rents saw year-on-year increase of 4.6%. Headline occupancy rates improved in both cities, where Grade A occupancy rates in Dammam and Khobar stood at 86.3% and 85.2%, respectively, as at Q1 2024. Over this period, the average Grade B occupancy rate within Dammam’s occupier market reached 71.6%.

In the 12 months to Q1 2024, average Grade A and Grade B rental rates in Jeddah saw year-on-year increases of 13.6% and 13.1%, respectively. The average Grade A occupancy rate rose by 0.7% points, while Grade B occupancy rate increased by 7.3% points. Grade A and Grade B average occupancy rates stood at 92.5% and 86.6%, respectively.

Hospitality Real Estate

The hospitality sector maintained robust performance in the first quarter, driven by high visitation levels. There was a marginal year-on-year increase in average occupancy rates by 0.1% points, with the Average Daily Rate (ADR) rising by 11.8%, leading to a 12% growth in Revenue per Available Room (RevPAR).

On a city level, over this period, Riyadh’s average occupancy rate declined by 4.4% points, and its ADR increased by 26.8%, resulting in a rise of 18.9% in the city’s average RevPAR.

Although the average occupancy rate declined by 3.7% points in Madinah, the city’s ADR registered an increase of 20.5%, which led to an increase of 15.2% in RevPAR levels. Makkah’s average occupancy rate marginally rose by 0.4% points, and its ADR grew by 9.1%, culminating in a RevPAR growth of 9.7%. In Jeddah, the average occupancy rate registered an increase of 6 percentage points. The city’s ADR grew by 3.2%, leading to a 13.9% growth in RevPAR levels. Dammam’s average occupancy rate saw an upsurge of 9.1% points while its ADR declined by 3.1% and the city’s RevPAR registered an increase of 13.5%.

In the year to date to March 2024, the average occupancy rate registered an increase of 8.8 percentage points compared to its pre-pandemic baseline, as all tracked cities have surpassed their 2019 levels. Over this period, the country’s ADR stood at 62.3% above its 2019 baseline and, as a result, the average RevPAR outperform the 2019 figure by 85.8%. Saudi Arabia’s Adel Real Estate launches blueprints for giant Dammam development.

Industrial Real Estate

The industrial sector in the first quarter of 2024 highlighted renewed efforts by the Ministry of Transportation and Logistics Services to enhance the logistical infrastructure and services.

Due to the ongoing logistical and industrial reforms, according to the World Economic Forum (WEF), Saudi Arabia scored 5.7 in the Quality of Road Infrastructure (QRI) score, which led to the Kingdom ranking 4th among G20 countries.

In terms of performance, in Q1 2024, Riyadh’s average industrial and logistics rent marked an increase of 8.1% from the year prior.

In Jeddah, in the 12 months to Q1 2024, the average industrial and logistics rent increased by 3.1%. Average industrial and logistics rents within Dammam registered a year-on-year increase of 4.6% in Q1 2024, while Khobar’s industrial and logistics properties recorded a decline of 2.8% in their average rent as at Q1 2024.