Real Estate

Seera Group invests $160m in Riyadh business park

November 9, 2023, 7:23 AM

Seera Group will be the primary investor in the development of Kayanat Central Business Park in Riyadh

Kayanat project in north Riyadh
100,000 sq m of office space
Rising demand in capital

Saudi travel major Seera Group plans to invest SAR600 million ($160 million) in a real estate fund to finance the development of a new business park in Riyadh.

Seera will be the primary investor in the Sharia-compliant fund with the aim of developing the Kayanat Central Business Park in the north of the Saudi capital.

The project is part of Saudi Crown Prince Mohammed bin Salman’s ambition to make Riyadh one of the 10 largest city economies in the world.

Kayanat is being promoted as a mixed-use development spread over 100,000 sq m, featuring office and retail space with parking for 4,000 vehicles.

In a filing to the Tadawul on Wednesday, Seera said the total cost of the project is estimated at $350 million, with it contributing nearly half via the fund.

The remainder will be obtained by the fund through “appropriate financing means”. The project is expected to achieve operating cash flows of SAR230 million annually, with its impact likely to start in the second half of 2026, Seera added.

Commercial real estate in the kingdom, especially in Riyadh, is experiencing strong demand and high occupancy levels.

According to consultants Knight Frank, office lease rates in Riyadh registered a 13 percent increase over the 12-month period to June on the back of rising demand.

Average lease rates for prime office space rose to about SAR1,890 per sq m while occupancy levels stood at 98 percent, up by 2 percentage points compared to the same time last year.

Heightened demand is also reflected in the lower grade office market, with rental rates rising by 15 percent over the past year.

Knight Frank said it expects the strong demand to “sustain and strengthen over the short term”, meaning the market will likely remain landlord-friendly, at least until significant new supply enters the market.

Just 100,000 sq m of supply entered the market during the first half of 2023, increasing the city’s supply to 5.2 million sq m.

Over the next three years, the city’s supply is expected to rise to 5.9 million sq m.

In its stock market filing outlining Seera’s new long-term strategy, the company also said its Almosafer travel subsidiary – which is set to surpass SAR10 billion in bookings by 2025 – presents an “attractive IPO opportunity” within the next two to three years.

In September, a 30 percent stake in Lumi, Seera’s car rental business, was listed on the Tadawul.

Seera’s share price closed up by just over 1 percent on Wednesday.