SAUDI ARABIA. Jones Lang LaSalle, the world's leading real estate investment and advisory firm, has published its first quarter (Q1) 2012 Jeddah and Riyadh Real Estate Overview reports.
The findings revealed that with more new stock entering the market, occupiers have an increased choice of options and this is resulting in greater competition and more variation in performance as tenants increasingly focus on better quality projects.
Older and poorer performing projects are losing out in the competition for tenants and are consequently requiring repositioning and more active property management.
Key Highlights - Jeddah
• Villa prices increased by 11% in the areas of Jeddah monitored by Jones Lang LaSalle during Q1-2012 to an average of SAR 4,600 per sq m with the western region of the city (closest to the Red Sea) remaining the prime location for villas.
Jeddah Villas – Average Sales Price
• Continued demand for new and high quality office space in Jeddah is reflected by the sale of the Eastern Tower in the upcoming Headquarters project on the Corniche (13,400 sq m) to the Savola Group for its new head office. The completion of additional projects is however likely to result in downward pressure on office rentals over the second half of 2012.
• The Jeddah retail market is becoming more fragmented. While rents for line stores in the best performing centres have increased to more than SAR 3,000 sq m, other centres are experiencing increased vacancies and reduced rentals as landlords seek to attract tenants.
• Jeddah has been one of the strongest performing hotel markets in the GCC during 2012, with occupancies (79%), room rates (SAR 770) and RevPAR, all up over the year to April. This reflects the continued attraction of Jeddah as a leisure destination for Saudi families.
Commenting on the Jeddah report, Soraka Al Khatib, Head of Jones Lang LaSalle’s Jeddah office noted: “The residential and hotel sectors of the Jeddah market have so far performed most strongly this year, with continued growth in sale prices, rental levels and occupancies. In the office and retail markets, the completion of more projects will increase options for tenants during 2012 and will lead to more competitive rental levels being offered to retain and attract tenants.”
Riyadh – Key Highlights:
• Riyadh has seen an increase in both sale prices and rental levels across all sectors of the residential market monitored by Jones Lang LaSalle. The average sale price for villas has increased to SAR 4,200 per sq m with apartment prices also higher at SAR 2,600 per sq m.
Riyadh Villas – Average Sales Price
• The take up of space in office projects due to complete later this year (eg: ITCC and Riyadh Business Gate) shows the continued demand for office space in Riyadh. This includes an 80,000 sq m pre-commitment to a large Saudi telecom provider in the ITCC project which represents one of the largest deals in the Riyadh market for some time.
• The Riyadh retail market remains relatively well balanced, with no significant change in either occupancies or rental levels recorded so far this year. As with Jeddah, there is an increasing variation between the rents that can be achieved for line stores in the most popular centres and the average rental value (around SAR 2,380 sq m) that has remained unchanged over the first quarter of the year.
• No new hotels have been completed in Riyadh during the first quarter of 2011, with the market continuing to adjust to the input of 1,200 new rooms during 2011. Occupancy levels and room rates have declined over Q1 2012 but this position is expected to be short lived as government initiatives promote more visitors to the capital.
Commenting on the Riyadh report, John Harris, Head of Jones Lang LaSalle’s Riyadh office noted: “Continued take up in ITCC and Riyadh Business Gate shows that there remains active demand for new high quality office space in Riyadh. The completion of these and other major projects (such as phase 1 of the King Abdullah Financial District) later in 2012 will change the face of the Riyadh CBD, resulting in a ‘flight to quality’ as tenants trade up from older buildings.”
Photo: Soraka Al Khatib, Head of Jones Lang LaSalle’s Jeddah office.
About Jones Lang LaSalle MENA
Across the Middle East, North and Sub-Saharan Africa, Jones Lang LaSalle is a leading player in the real estate market and hospitality services market. The firm has worked in 35 Middle Eastern and African countries and has advised clients on more than US$ 1 trillion worth of real estate, hospitality and infrastructure developments. Jones Lang LaSalle employs over 100 internationally qualified real estate and hospitality professionals of 30 nationalities with regional offices in Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of US$ 3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.
The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company's investment management business, is one of the world's largest and most diverse in real estate with US$ 47.7 billion of assets under management.