JLL: Riyadh Market Overview Q1 2011
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The road to home finance has been a long one for the Kingdom, but with its highly anticipated mortgage law edging ever closer to ratification, would-be homeowners and financial institutions are gearing up for a new era of opportunity.
With the announcement this year of a US$66.7 billion initiative to address the demand-supply imbalance in the Kingdom’s housing market, social infrastructure spend is topping the Government agenda as it focuses on building affordable homes for the future.
The South-East Asian island has seen a number of distinctive developments come to fruition over the past few years as the country further establishes itself.
Land trading remains the most active sector of the real estate investment market in Saudi arabia. Trading volumes have increased in the Riyadh market, driving up land prices during Q1 2011.
Owners have begun to recognise the importance of property/facility management and are now preparing new strategies.
Public companies and agencies leading investment and development. Plans to construct a further 500,000 residential units and major investment in infrastructure, transport, health and education sectors will further reinforce this position.
The office market continues to see new supply entering the market pushing CBD vacancies up to 18%. While demand is strong, it is unlikely to offset additional supply levels, resulting in a further decline in average rentals during 2011.
The office market will remain tenant favourable during the next three years. There will be opportunities to 'trade up' from existing facilities and improve workplaces, enhance security and increase parking.
While retail sales have increased on the back of the government stimulus package, rents are generally stable and vacancies have increased in secondary centres during Q1 2011.
Development opportunities remain for community retail centres because city limits are expanding and new residential areas are being developed.
Residential rents and sale prices are increasing and should contimue to do so for the rest of 2011. Mortgage and off plan sale reforms should augment demand next year.
Developers now recognize affordable housing demand, but high land prices and a reliance upon traditional construction techniques remain significant hurdles to private sector delivery of affordable housing in Riyadh.
The Riyadh hotel market has moved into the recovery stage of the property cycle in Q1 2011, with increasing ADR's and Rev PAR compared to the same period in 2010.
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