As the global macroeconomic environment improves and headline inflation subsides, Saudi Arabia’s real estate market is experiencing a wave of investment, spurred by declining interest rates and proactive government initiatives, according to insights shared by Jones Lang Lasalle (JLL) during a roundtable discussion in Jeddah.
Optimism in the construction sector
The drop in borrowing costs, coupled with a strong pipeline of construction projects moving into the execution phase, is driving optimism and energizing activity throughout the Kingdom’s real estate sector. Industry leaders and experts gathered in Jeddah to explore the dynamic opportunities and emerging trends that are shaping the real estate landscape in the Kingdom.
Resilience in risk management
Saudi Arabia’s strategies for risk management in the face of disruptions have effectively mitigated impacts on the national economy, including the real estate sector. This resilience, alongside a strong commitment to economic diversification as outlined in the Kingdom’s ambitious Vision 2030 reform agenda, supports growth and boosts investor confidence.
Focus on transparency and sustainability
In recent years, Saudi Arabia has adopted a focused governmental approach with an increased emphasis on sustainability and technological integration to enhance real estate transparency. With the introduction of 18 new legislations, including updated real estate systems and regulatory frameworks, the Kingdom now ranks second among the most improved markets globally in terms of real estate transparency.
Innovative development techniques
In addition to the Kingdom’s high transparency score, the utilization of innovative construction techniques and technologies will be vital for the ongoing development and successful execution of some of the world’s largest urban development projects currently underway in cities, particularly in Jeddah.
Progress in regulatory frameworks
Reflecting on the Kingdom’s broader initiatives to enhance the real estate sector, James Allan, CEO of JLL MEA, noted the substantial improvement in JLL’s Global Real Estate Transparency Index (GRETI) as a sign of the Kingdom’s progress in establishing robust regulatory frameworks and enhancing market transparency. He emphasized that these advancements are essential as the Kingdom continues to transform its real estate sector to align with Vision 2030 objectives.
Key themes for Vision 2030 alignment
As Saudi Arabia intensifies its efforts to align key projects with the goals of Vision 2030, the roundtable brought to light several critical themes influencing the Saudi real estate market, such as a strong commitment to sustainability and net-zero targets, along with a renewed focus on local sourcing and manufacturing.
Promising outlook for real estate
Saud Al Sulaimani, country head for KSA, highlighted the promising outlook for the Saudi real estate market, noting the government’s coordinated approach to advancing key areas like urban development, sustainability, and housing affordability. He remarked that the increasing demand for public-private partnerships is driving innovation and growth, and expressed expectations for strong performance across most sectors in Q4, following key approvals and project resumptions.
Providing an overview of KSA’s project market, Maroun Deeb, Head of Projects and Development Services for KSA and Bahrain, pointed out that while the total value of awarded projects may have temporarily slowed, the Kingdom anticipates a significant rise in projected cash flow in the coming years, with spending expected to peak in 2027. He stated that the future project pipeline includes initiatives worth $826.3 billion currently in the design stage, with over $100 billion at various stages of implementation.
Industrial and logistics real estate growth
The roundtable also explored the development prospects for high-quality industrial and logistics real estate in KSA. Currently ranked 38th on the Logistics Performance Index (LPI), the Kingdom offers great potential for growth in this sector, particularly in Jeddah, a key warehousing hub. The city accounts for just 10 percent of Grade A warehousing, presenting a prime opportunity for expansion in light of the rising demand from e-commerce, third-party logistics (3PLs), and cold storage.
Impact of global events on real estate
Participants discussed how global events, such as the World Cup 2034 and Expo 2030, could influence Jeddah’s real estate market, recognizing the city’s increasing global appeal as a prime investment destination. This trend is particularly evident in the residential sector, where new development projects are increasingly located outside Jeddah’s historic core, showing a marked shift to the northern parts of the city. This trend is mirrored in the 5 percent year-on-year increase in average sales prices for residential properties.
Trends in office and retail sectors
In the office sector, average Grade A rents have risen by 11 percent year-on-year, with vacancy rates for these premium offices at a mere 4 percent. The retail sector also shows potential, with a citywide vacancy rate of 18 percent, indicating room for further expansion.
Opportunities in the hospitality sector
Leading the speaker lineup at the JLL roundtable were Sarah Gasim, SVP- head of Hotels KSA; Taimur Khan, Head of Research for the Middle East and Africa; and Abhishek Mittal, Head of Industrial and Logistics Consulting for MEA. They highlighted significant investment opportunities within Saudi Arabia’s thriving hospitality sector, especially in the Makkah region, where demand continues to grow annually. Cities like Jeddah, catering to both leisure and business travelers, benefit from excellent connectivity to regional and international destinations, along with a well-developed infrastructure network that effectively mitigates the risks associated with new hospitality developments.
