Gov’t initiative to support Saudi retail and office sectors: report

The outlook of Saudi Arabia’s retail sector remains positive in the long term, owing to rapid digitalization, favorable demographics and supportive initiatives by the government, Cavendish Maxwell said in a recent report.

Rentals in the retail sector are expected to continue over the rest of 2019 as new retail space is added to the market, it said, after rates declined last year on the back of lower consumer spending due to the introduction of VAT, it added.

In the office sector, Riyadh continues to be the preferred destination for businesses, accommodating the highest share of the country’s total workforce at 38 percent.

“In the long term, supply of office space catering to large-scale companies and SMEs is expected to increase as the government encourages private industries to ramp up operations in the Kingdom,” the report noted.

Meanwhile, the introduction of luxury properties, entertainment venues and business destinations is set to attract a huge influx of domestic and international visitors, Cavendish Maxwell said.

Saudi Arabia has over 64,000 rooms across various phases of the hotel development pipeline, representing 76 percent of the over 84,500 existing hotel rooms in the Kingdom, the report mentioned, citing STR data.

“A mix of regional and global headwinds and oil price fluctuations have exerted downward pressure on property prices across segments in Saudi Arabia, with the trend likely to continue over the coming months,” said Aditi Hariharan, associate partner, strategic consulting and research at Cavendish Maxwell.

“However, the Kingdom continues to power through with the initiatives charted out in the Vision 2030 plan, increasingly making progress towards its goals to diversify the economy and attract investments. As more reforms are implemented and private sector activity grows, the positive effects will spread across sectors, including real estate,” she said.