Saudi Arabia Real Estate Report 2016 - New Study Released

Saudi Arabia ' s non-oil economy and robust underlying growth will support investment into the commercial real estate market over the longer term. Growing numbers of foreign players are also expected to enter the market during this period, on the back of governmental incentives and reduced restrictions which will see strong demand for office and retail space. Although, rental stagnation is expected over the remainder of 2015, with potential marginal rises by 2016.

Oil is the key driver of the Saudi economy contributing just under half of the country's GDP, over 90% of exports and around three quarters of the Government's capital reserves. In an effort to reform economic reliance, the Government is seeking to diversify the economy, particular towards manufacturing and services. This has seen Saudi Arabia making great strides to open up their economy to foreign investors. Following accession to the World Trade Organization (WTO), new laws and initiatives on competition, capital markets, corporate taxation, insurance and foreign ownership of lands began to create a more level playing field. This can be witnessed by the introduction of favorable business policy, such as the allowing of 100% ownership in wholesale and retail outlets, which have alleviated pressure on foreign profitability in the market. We believe that the government's determination to keep fiscal policy on an expansionary footing along with pent up levels of public investments, will provide suitable fundamentals to support the expansion of the non-oil economy. We therefore forecast real GDP growth of 3.7% this year (using 1999 as a base year) and 3.2% in 2016, compared to 4.0% in 2013.

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Riyadh is the capital and largest city of Saudi Arabia, with a regional population of an estimated 7mn. It is a focal point for both travel and trade. King Fahad Road has been a primary objective for businesses in the city, with a variety of commercial properties residing here. King Abdullah Street however, is also increasing in importance and should appeal to emerging market players. Large regional and super regional shopping malls here comprise the majority of consumer interest, and due to the fact that a good proportion of entertainment facilities are band in the country, we see this continuing to be a major contribution to the economy here.

Jeddah on the other hand retains an extensive port, which has aided the city in securing its place as a commercial hub. Prime corporate office space and retail real estate are in demand with the most prominent activity witnessed on King Abdullah Street and Tahlia street, which contains many exclusive boutiques and stores of recognised international brands including Chanel, Burberry and Gucci. Retail sales therefore comprise a large component of the economic revenues here and we expect this trend to continue as demand rises for contemporary western units.

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