The retail sector in Saudi Arabia saw an increase in retail space and a strong recovery in domestic demand in the first six months of the year following the easing of Covid-related restrictions -19.
With an addition of 55,000 m² of gross leasable area (GLA), Riyadh’s total retail space stood at 3.3 million m², while Jeddah’s retail space increased from 16,000 m² to 1.7 million of m² and the figure of Makkah increased by 17,500 m². to 1.4 million sqm in the first half, according to JLL’s Q2 2022 Real Estate Market Snapshot for Saudi Arabia.
The Dammam Metropolitan Area (DMA) was the only market without notable completion recorded in the first half of 2022, leaving its retail stock unchanged at 1.2 million sqm.
A million pilgrims
“For the first time in two years after the easing of restrictions related to the Covid-19 pandemic, Saudi Arabia is allowing more than one million pilgrims to perform Hajj this month. Not only should this give a boost to Makkah’s retail sector, but it should also help the kingdom reach its goal of tripling the number of foreign visitors to 12 million this year. Overall, the higher number of visitors is likely to have positive implications for the retail market in Saudi Arabia,” said Khawar Khan, Head of Research, Mena and Turkey at JLL.
“These factors are also, of course, having a positive impact on the hotel market in the Holy City, as well as Riyadh and Jeddah where hotel occupancy rates increased in the first half of this year. “
The latest data from the Saudi Arabian Monetary Authority for the months of April and May 2022 showed that the value of point-of-sale transactions jumped 16% year-on-year to a total of SAR 91.8 billion in the month. entire kingdom. . In addition, the Purchasing Managers’ Index (PMI) of 57.0 in June was higher than in May (55.7), remaining in expansion territory for the twenty-second month in a row. This indicates healthy growth in private non-oil activity for the year to date.
Despite a quarter-on-quarter decline in the capital’s vacancy rate, the figure remained in double digits in the second quarter. The excess availability of commercial space in Riyadh has led to lower rents. On a more positive note, rents in Jeddah have increased by an average of 3% in regional and super-regional malls. The performance of shopping malls in DMA and Mecca was broadly stable in the first six months of this year.
Landlords are also implementing various strategies to attract and retain tenants, including integrating dining and entertainment facilities into malls to increase footfall. Currently, developments with similar positioning are outperforming the market in terms of occupancy and footfall.
The easing of Covid-19 restrictions and changes to visa rules have been largely responsible for the sharp increase in the number of pilgrims traveling to the kingdom to perform Umrah, especially during the month of Ramadan. . This has led to Makkah’s hotel sector posting a strong performance in the first five months of this year, with the holy city’s occupancy rate nearly tripling (from 21% in the first five months of 2021 to 60 % over the same period of 2022) and the average daily rate (ADR) increasing by one digit to $172. As a result, revenue per available room (RevPAR) jumped to $103 for Jan-May 2022, the highest level since 2019.
The Riyadh Seasons entertainment festival and the Jeddah Season festival have helped boost the hospitality sector this year. The capital welcomed more than 15 million visitors during the five-month event, pushing the city’s occupancy rate to 62% between January and May 2022 (compared to 46% during the period corresponding to 2021) and the ADR jumped 23% to $179.
Improvements on both fronts pushed RevPAR up to $111. Jeddah welcomed more than five million visitors during the two months of the festival, pushing the occupancy rate from 42% in the first five months of 2021 to 49% in the same period of 2022 and the ADR increased by 5% to reach $200.
In the residential market, Riyadh accounted for the largest share of new residential units delivered with the completion of 16,000 units, bringing the capital’s residential stock to 1.4 million in the second quarter of 2022. Across Jeddah, Makkah and DMA, the number of units delivered amounted to 9,000 in the first half of the year.
During the rest of the year, approximately 16,000 units are expected to be delivered to Riyadh (equivalent to 1.1% of existing stock), 10,000 (2.7%) to DMA, 9,000 (1.1%) to Jeddah and 5,000 (1.2%) in Mecca. .
In Riyadh, residential transactions have tended to decline in recent months. However, rents have increased, helped by the dynamism of the capital’s labor market. In Jeddah, the ongoing redevelopment of the city and the resulting growth in demand for housing contributed significantly to the annual rise in prices and rents, up 3% and 7%, respectively, in the second quarter.
In the capital, underlying demand for residential properties remains strong and is expected to continue to strengthen in the longer term as the government pursues its ambitious target of making the city one of the 10 largest in the world by 2030 Recently, locations in proximity to commercial areas have seen strong growth in demand as Riyadh continues to attract global talent.
From an office market perspective, Riyadh continued to attract government and related entities, as well as global and local companies expanding their footprint or relocating to the kingdom’s business hub.
In the first half of 2022, Jeddah delivered the largest amount of office space with the completion of 16,000 sqm, bringing its total office stock to around 1.2 million sqm over the same period, around 14,000 sqm of floor space were added to Riyadh’s total. supply and 1,400 m² in stock in Mecca. In terms of upcoming procurement in the second half of the year, around 391,000 sqm of office GLA are expected to be delivered in total in Riyadh, Jeddah, Makkah and DMA.-
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