Foreign HQs drive Riyadh rent growth to record highs

Reuters/Faisal Al Nasser

• New HQ rules push demand
• Office space let before it hits market
• Grade A occupancy now 100%

A rush of international companies to set up regional headquarters in Riyadh is driving record increases in commercial property rents, latest figures reveal.

Prime rents in the Saudi capital rose by almost 24 percent in the year to Q3, according to CBRE, with rents currently at SAR2,617 ($712) per sq m. 

Observers say Saudi Arabia’s RHQ programme is having a big impact on demand for quality office space, with 180 licences issued to companies to set up regional HQs so far.

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As the January deadline approaches for international businesses to move or be cut out of contracts worth SAR1 million or more, occupancy levels in Riyadh’s Grade A segment of the market have reached 100 percent, the real estate consultancy CBRE said. 

The average Grade B occupancy rate remained stable at 99.4 percent and the average prime occupancy rate increased by 8.2 percentage points to reach 92.2 percent. 

At the end of Q3, Riyadh’s King Abdullah Financial District recorded upwards of 60 percent of its office space as leased. This rate is substantially higher for occupiable supply, at 92 percent. Landmark transactions include the acquisition of 22,000 sq m of office space by two management consulting firms. 

While demand remains very much centred on Riyadh, CBRE said it is also seeing demand trickling into Jeddah and the Dammam Metropolitan Area. 

Projects in Riyadh’s office market will add nearly 500,000 square metres of space in the next two years.

Taimur Khan, head of research for Mena at CBRE, said the high levels of demand meant property was being leased before even entering the market. He said it anticipated performance levels to remain strong due to the supply shortage in the market.

Many companies have been finding workarounds to boost their presence in the kingdom without sacrificing their ties to the UAE, which has built itself up over the past two decades as the region’s main international business centre.

The RHQ programme is part of plans to make Riyadh one of the world’s 10 largest city economies by 2030, while at the same time more than doubling its population to 15 to 20 million.