Looming deadline sees scramble for Riyadh offices

Unsplash/Alex Kotliarskyi

• 80 new corporates have set up headquarters in Riyadh
• Multinationals take lower grade space ahead of year-end deadline
• Prime rents up 13% and grade B rents up 15%

As an end of year deadline for setting up regional headquarters in Saudi Arabia looms, international companies are taking lower grade Riyadh office space due to a shortage of availability in prime locations.

Crown Prince Mohammed bin Salman announced in February 2021 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 SR70 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.

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The Royal Commission for Riyadh City reported that 24 brands such as PepsiCo, Schlumberger, Deloitte, PwC, Tim Hortons, Bechtel, Bosch, and Boston Scientific, had signed up to the Regional Headquarters Attraction Programme of Multinational Companies.

Faisal Durrani, head of Middle East research at real estate consultancy firm Knight Frank, said the impending deadline has led to the number of new corporates setting up their headquarters in Riyadh rise to 80.

Increased demand and a severe shortage of prime office space has resulted in rents in Riyadh averaging SR1,890 per sq m, an increase of 13 percent in the last year, Durrani said.

Corporates have accepted lower grade units in order to meet the requirements ahead of the January 2024 deadline due to the lack of availability.

Only 100,000 square metres of new office space was delivered during the first half of 2023, according to Knight Frank, with a further 676,000 square metres forecast to be completed between now and the end of 2026. 

“In a normal market, we would expect to see a greater delta between Grade A and Grade B rents given the global occupier focus on best-in-class space,” Durrani said.

“However, given the national office supply shortage, Grade B rents are also climbing and are up by 15 percent in Riyadh and 7 percent in Jeddah as businesses settle for less than their ideal space.”

Average occupancy rates for Grade A office buildings have also remained strong in the kingdom, reaching 98 percent in Riyadh and 94 percent in Jeddah.