Long term demand for office sector from Vision 2030

20 December 2018

According to real estate consultant Knight Frank, while there have been a number of notable commercial office transactions throughout 2018, key occupiers both from the public and private sector look to expand or move to upgraded premises.

In terms of performance, market wide rents and occupancy levels have been under pressure since 2016. Key prime schemes continued to perform better than the market average as a result of a lack of high quality stock. “However, a major headwind is that a large portion of upcoming supply falls within this category, which could put pressure on performance in this segment. Against the backdrop of a highly elastic supply dynamic, we see rents for Grade B assets softening further in the short term where buildings that suffer from poor accessibility and parking arrangements will struggle for occupancy,” according to Knight Frank.

Vacancy rates are expected to rise placing downward pressure on rents. In this context, we expect landlords to continue offering incentives in order to maintain occupancy levels amid an increasingly competitive market.

“Longer term, we see demand for office space picking up from current levels as economic reforms under the National Transformation Plan (NTP) and Vision 2030 start feeding through the wider economy, translating into an acceleration of growth in the non-oil private sector.

Moreover, the implementation of various urban regeneration initiatives including mixed-use communities and large-scale infrastructure projects, is expected to act as a catalyst for the real estate market. Furthermore, it is expected that the planned wave of privatisation will boost investment and foster growth in the business environment creating favourable conditions for the office sector,” notes the real estate consultant.

Saud Sulaymani, Partner at Knight Frank Saudi Arabia, comments: “Going forward, the implementation of various urban regeneration programs, mixed use communities, and large-scale infrastructure projects is expected to act as a catalyst for the real estate market in the Kingdom.”