Business rents begin to fall in Saudi Arabia
Business rents in Saudi Arabia have started to fall, with incentives coming more widespread, a new report suggests.
A significant volume of new prime office space has started to enter the Riyadh market, particularly at King Abdullah Financial District (KAFD), with overall occupancy rates beginning to rise,
These factors have caused rents in the Kingdom to rental rates to fall, according to the latest Saudi Arabia MarketView by CBRE, the global real estate consultancy firm.
“Headline rents offered at KAFD are high in comparison to existing market norms, but terms are flexible and there is room for negotiation on incentives,” said Mike Williams, head of research & consultancy, CBRE Middle East.
“In the existing prime office areas in the southern central areas, office rental rates are starting to come under downward pressure and new supply in these areas is forcing both lower headline rents and more generous incentive packages.”
By contrast to both these areas, a number of business park projects that have recently emerged in northern Riyadh such as Granada Business Park, ITCC and Riyadh Business Gate have proved extremely popular, notes the CBRE report.
“All three of these projects are either fully occupied or nearing full occupancy at strong rates and without significant support from incentive packages,” added Williams.
“These projects have successfully met market requirements by providing good access, parking and quality as well as being located in the northern parts of Riyadh that are attracting increasing interest.”
According to the CBRE report, the supply of prime office space in Jeddah looks set to jump with the completion of The Headquarters Business Park in the second half of 2013, but growth in demand largely driven by government expenditure on infrastructure will likely moderate the threat of oversupply.
Rental rates in Jeddah remained static in the first half of 2013 despite a slight drop in vacancy rates during the same period.
“International firms engaged in implementing government infrastructure projects will likely absorb much of the new and existing space, and there is likely to be a relatively balanced environment where neither supply or demand move significantly out of line,” commented Williams.