The demand for Saudi office rents is on the rise. According to a report from Global Commercial Real Estate Services (CBRE), the growing number of foreign businesses setting up headquarters in the country is driving the growth of premium spaces in major markets, especially in Riyadh.
In the capital city, the leasing rates for prime office spaces increased 24 percent in the third quarter (Q3) of 2023. Similar trends were observed in other cities, where rental increases ranged from 1 percent to over 18 percent.
Growth in key locations
CBRE’s report on Saudi office rents highlighted growth in various locations across the country, particularly in Riyadh’s King Abdullah Financial District.
Prime rents in the Saudi capital surged by 23.8 percent in the year leading up to the second quarter (Q2) of 2023. The price averaged $698 per square meter. In particular, Grade A rents witnessed a 12.9 percent increase to an average of $507 per square meter. Meanwhile, Grade B offices recorded an 18.9 percent rise, hitting an average of $408 per square meter.
In Dammam, average rents for Grade A spaces increased by 7.5 percent to $253 per square meter. On the other hand, Grade B rents rose by 4.8 percent to $147 per square meter. Similarly, in Khobar, Grade A offices saw a 9 percent increase in leasing rates. Currently, they average $291 per square meter.
Jeddah also witnessed a surge in office rents. Its Grade A rates rose by 17.9 percent to $362 per square meter. Additionally, Grade B posted a 1 percent increase, reaching $189 per square meter.
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Program HQ pays off
Taimur Khan, head of research at CBRE MENA, underscored the robust demand for quality office spaces throughout Q3. The real estate consultancy’s report noted that the surge in Saudi office rents primarily benefits the premium segment. In this segment, upcoming supply is consistently being leased even before entering the market.
“This uptick in demand is resulting from the influx of new international companies, driven mainly by ‘Program HQ’, paired with increased requirements from emerging domestic entities,” shared Khan.
He added, “For the remainder of the year, we anticipate performance levels to remain strong due to the quality supply shortage in the market, as additional entities look to set up in the kingdom.”
The Program HQ initiative entices global businesses to establish their regional headquarters in Saudi Arabia. This is in line with the country’s bid to diversify its economy and boost foreign investment.
One of the program’s requirements is for businesses to have a physical office in Saudi. In exchange for setting up a headquarters in the country, these entities will enjoy various benefits, ranging from tax exemptions to Saudization.
In a recent report, Investment Minister Khalid Al-Falih shared there are already over 180 international companies established in Saudi, already outperforming the year-end target of 160.
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