RIYADH: Saudi Arabia’s prime office rental space saw a 5 percent growth in transactions in the first quarter of 2024 compared to the previous period, according to an industry report.
As per the global real estate services provider Savills analysis, Riyadh achieved an occupancy rate of 98 percent in early 2024, with rents increasing by 20 percent year on year.
“Despite healthy demand, a significant decrease in the number of office rent transactions was recorded in the first quarter, with Ejar data indicating a 27 percent drop in transactions quarter on quarter due to the limited availability of office spaces,” Amjad Saif, head of transactional services at Savills Saudi Arabia, said.
“However, Grade A offices witnessed an increase in rents by 5 percent compared to the last quarter, owing to the buoyant demand for quality assets amid their limited supply,” Saif added.
The report also highlighted that 74 percent of Savills’ inquiries originated from overseas, with an impressive 37 percent coming specifically from US corporations.
“Riyadh is experiencing a remarkable surge in corporate interest, with over 180 foreign companies surpassing the initial target of 160 choosing to establish their regional headquarters in the city,” Ramzi Darwish, head of Saudi Arabia at Savills Middle East, said.
“This growing confidence reflects the robust potential of the Saudi capital, fueled by the country’s strategic economic diversification plan. Prominent entities such as Franklin Templeton and Allen & Overy have recently set up their regional bases in the capital Riyadh,” he added.
The report also indicated that the Business Parks and the King Abdullah Financial District are experiencing significant interest, with 75 percent of transactions involving relocations to these areas.
To address demand concerns, over 420,000 sq. m of new Grade A office space is expected by year-end, providing tenants with greater flexibility and helping to stabilize rental prices, the analysis stated.
Significant leasing activity was observed in the first quarter of 2024, with legal services leading the way, followed by engineering, manufacturing, and information technology sectors.
Additionally, technology, media, telecommunications, banking, and financial services, as well as insurance companies, dominated occupier inquiries, reflecting diverse industry interests.
