Companies leasing office space in Saudi’s capital could see their rents jump to levels on par with property in Abu Dhabi and Dubai, said Jones Lang LaSalle in a report published Tuesday.
Commercial rates in Riyadh are averaging SR1,060 per sq m in the city’s Central Business District (CBD), as a string of new developments helps to attract businesses to the region.
Developments such as Riyadh Business Gate, the ITC Complex and the King Abdullah Financial District in particular are attracting business tenants to the capital, cutting vacancy rates in the CBD to just 16 percent, the property broker said.
“Demand [for office space] is strong in the Riyadh market, from the government, the multinational sector and also from Saudi conglomerates and contractors,” said the report, adding that prime office space was commanding rents of about SR1,400.
“There will be upward pressure on vacancy rates in 2012 with the completion of new supply, however, the top quality projects…will continue to enjoy occupancy levels close to 100 percent.”
Residential property rates in the Gulf kingdom are also rising, a trend likely to continue into the new year, JLL said. Average villa prices across all Riyadh districts rose four percent in the third quarter year-on-year, reaching SR3,050 per sq m.
Apartments also saw a small uptick, with the average price per sq m passing SR2,343, a rise on one percent on the year-earlier period.
“Increasing land prices and access to better roads networks have played a major role in increasing villa prices,” the report said. “Due to high occupancy rates, rents in [especially] middle income areas have also continued to grow at high levels.”
In the next two years, more than 2,000 compound units will be added to the existing stock, the company said, relieving the existing expatriate housing shortage.
However, residents could soon be subjected to a flurry of new real estate laws, with the practice of owners’ associations and service charges being tested on two pilot projects.