New energy park to fuel Saudi demand for office space
The development of King Salman Energy Park (SPARK), one of the largest investments in the Saudi Eastern Province, is set to boost sectors of Dammam Metropolitan Area’s (DMA) real estate market and in the long term contribute to national GDP, says JLL’s latest report.
In line with Saudi Vision 2030, the energy park is being undertaken by Saudi Aramco and will serve as an economic catalyst, creating tens of thousands of jobs in a global industrial hub for energy-related manufacturing services, boosting the office sector in the DMA area.
“The plans to diversify the Saudi economy away from the oil and gas sector presented a less positive outlook for oil-rich Dammam compared to other cities across Saudi. However, this new energy-hub demonstrates major investments being made within the energy sector itself to fuel economic growth,” said Craig Plumb, Head of Research, MENA at JLL.
“SPARK presents a more positive outlook for the DMA region as development of the park is expected to enhance the region’s office market as tenants come on board,” he continued.
As part of the National Transformation Program, the energy park is estimated to contribute SAR 22.5 billion ($6 billion) to the national GDP annually once developed by 2035. The energy hub will boost the downstream petrochemicals sector and will increase the contribution of local content across different industrial sectors.
For example, Saudi Aramco recently announced awarding 10-year purchase agreements to 16 pressure vessels manufactures which will increase demand for office space in the DMA in the coming years.
In H1 2018 the office market continued to soften. Supply of office space increased with the completion of Al Rashid Office Tower, Sidra Complex, and Al Waleed Business Center. Demand is expected to increase in the medium to long-term, in line with the target for Saudi Aramco to source 70% of its inputs from local companies.
Across other sectors, the residential stock continues to grow, at a slightly slower rate than in previous years. The retail sector recorded no new completions in H1 2018, with the total stock remaining around 1 million sqm.
The hospitality sector was active in H1 2018, with 5 new hotels and 2 serviced-apartment projects entering the market in DMA. As with other markets across the region, occupancies have held up while average room rates have continued to decline and this pattern is expected to continue over the rest of the year.
The full report can be downloaded here.
JLL is a leading professional services firm that specializes in real estate and investment management.