Arab News, Tuesday, Feb 12, 2019 | Jamadi Al Thani 7, 1440
Office space demand rises in Riyadh due to growth of start-ups
Riyadh is seeing rising demand for
office space that caters specifically to small businesses and startups despite a
strong supply pipeline, according to a new report.
Total office stock in Saudi Arabia’s capital stood
at 4.2 million square meters of gross leasable area (GLA) by the end of 2018,
according to broker CBRE, with an additional 870,000 square meters expected to
be delivered by 2022.
It follows a number of Government-led initiatives
aimed at stimulating private-sector growth and promoting a spirit of innovation
and entrepreneurship in line with Vision 2030, CBRE said.
The broker’s Market Snapshot for 2018 also
highlights a growing trend for office supply as part of mixed-use development.
Rents remain under pressure in the Saudi capital with both the primary and
secondary office rents down by about 4 percent and 7 percent year-on-year
But increased incentives by landlords, discounts
for long-term leases, and other tenant perks could help to mitigate declines in
“The recent economic and social initiatives and
legislation introduced by the Saudi Government have already had an extremely
positive impact on the country’s real estate sector,” said Simon Townsend, head
of strategic advisory at CBRE MENAT and General Manager, CBRE KSA.
“Meanwhile, the increased government spending on
large-scale infrastructure and mega-projects is expected to further stimulate
the overall market, with a positive trickling-down effect on all key sectors.”
The opening up of the entertainment industry in
Saudi Arabia could also boost the hospitality sector, which has traditionally
been driven by corporate demand in Riyadh.
However in the short term at least, CBRE expects
daily rates to remain under pressure.
According to CBRE’s Market Snapshot, more than
5,000 keys are expected to be delivered to the market by 2022.
In the residential sector, CBRE estimates expected
delivery of 130,000 additional units by 2022 to add to the existing inventory of
about 1.25 million units.
The government wants to increase the availability
of affordable housing throughout the Kingdom and has signed a number of public
private partnerships to spur development.