Riyadh real estate reports mixed performance for Q1
In a mixed performance of the real estate sector in Riyadh, the largest city in Saudi Arabia, the residential and hotel market softened in the first quarter, while the office and retail segments witnessed some marginal growth, according to advisory firm JLL.
Sale prices for villas and apartments bottomed out after remaining relatively stable since the past quarter. Prices for apartments and villas plunged by four per cent and six per cent year-on-year, respectively.
On the other hand, rental rates for villas and apartments dropped marginally by nearly one per cent across Riyadh.
Residential transactions were down by six per cent in the three months leading up to March 31, according to figures from kingdom’s Ministry of Justice. This marked the lowest decrease in transactions since the introduction of the mortgage regulations in November 2014.
Nevertheless, roughly 6,000 units have entered the market during the first quarter of 2016, bringing the total stock of residential units to 995,000.
Hotel occupancy rates fell by nearly two per cent to reach 62 per cent during the period under review.
“We are witnessing a general slowdown in performance, which is mainly driven by lower corporate demand triggered by a continued period of low oil prices. This scenario is expected to put further pressure on performance as new supply enters the hotel market,” said Jamil Ghaznawi, National Director and Country Head of JLL KSA.
In the retail segment, rents rose marginally by two per cent compared with the same period in 2015. Vacancy rates reached seven per cent after recording a marginal drop during the past quarter.
With no new completions during the first quarter of 2016, the total supply of retail space in Riyadh has remained unchanged at 1.4 million square metres of gross leasable area (GLA). But approximately 212,000 sq m of GLA are expected to be completed over the remainder of the year, with the majority of the supply coming from the Al Hamra Mall, Khaleej Mall and smaller community centres, such as Robeen Plaza and The Boulevard.
JLL projects that vacancy rates may go up as new supply enters the market. “There are some positive signs in the retail market, which continues to be fairly stable, with marginal growth in rental rates during Q1. But there could be some upcoming downward pressure on retail vacancy rates, due to multiple malls expected to open over the course of 2016,” stated Ghaznawi.
During the first three months of the year, office vacancy rates remained stable at 16 per cent, while, in the city’s central business district (CBD), vacancies marginally dropped to six per cent due to a strong demand and limited new supply.
Rental rates marginally rose across the city to reach SAR1,263 per sq m, while prime commercial rates have remained stable at SAR1,700 per sq m.