358% rise in licences turbocharges Riyadh office rents

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• Vision 2030 plan to create 35,000 jobs for Saudi nationals
• Capital’s prime office rents up 6.5 percent in the last 12 months

Office buildings in Riyadh have seen a surge in rental rates and occupancy levels, as the Saudi capital begins to see the benefits from a new policy to encourage international companies to set up their regional headquarters in the city.

In February last year, Crown Prince Mohammed bin Salman announced plans to transform Riyadh into one of the top cities in the world, create 35,000 jobs for Saudi nationals and boost the national economy by up to SAR 70 billion ($18.67 billion) by 2030.

As part of the plan, the Saudi government announced that from January 1, 2024, it would cease offering contracts to international companies who did not have their regional headquarters located in the kingdom.

The Royal Commission for Riyadh City (RCRC) reported that 24 international firms, including global brands such as PepsiCo, Schlumberger, Deloitte, PwC, Tim Hortons, Bechtel, Bosch, and Boston Scientific, had signed up to the programme.

• Saudi property prices surge, but volumes slump

As part of the Regional Headquarters Attraction Programme of Multinational Companies, it was announced in October last year that the number of multinational conglomerates on the list had risen to 44, but the Saudi capital has continued to see a dramatic rise in the number of international companies attracted to the city.

“The number of international business licences surged by 358 percent last year, with most of the demand concentrated on the capital, Riyadh,” Faisal Durrani, head of Middle East research at real estate advisory firm Knight Frank, said in a press statement.

“Unsurprisingly, occupancy levels across the city’s prime office buildings have climbed, hitting 96 percent, the highest level in at least five years,”

“Riyadh’s prime office buildings are experiencing unprecedented levels of demand. Rents have increased by 6.5 percent in the last 12 months to reach SAR 1,560 per square metre.”

Forty-four percent of the 2,056 investment licences in the final quarter of 2021 were from the retail and e-commerce sector, Knight Frank said, resulting in rental rates in Riyadh’s largest malls increasing 1 percent to SAR 2,716 per square metre over the last 12 months, while smaller malls saw rates rise by 1.4 percent year-on-year.

“We have noted a steady stream of requirements from international retailers looking to enter the kingdom, with a focus on Riyadh, putting upward pressure on rents,” Pedro Riberio, head of KSA Retail Advisory at Knight Frank, said.

“Malls are the primary target for these new entrants and regional and super-regional mall lease rates are beginning to creep up as new requirements gather pace.”

The report also found that demand for Jeddah office space has also begun to increase since businesses began to recover from the pandemic, but at a slower pace.

Knight Frank said prime office rents in Jeddah increased by 2.5 percent in the first quarter of this year.

Riyadh has dominated the real estate sector overall, according to the latest figures from the Saudi Ministry of Justice.

The ministry reported that the value of the kingdom’s real estate transactions rose 13 percent year-on-year in April and May 2022, with the Saudi capital accounting for 38 percent of the value of deals nationwide.