RIYADH: Saudi Arabia’s push for regional headquarters has spurred demand for office space in Riyadh, with the capital’s stock set to grow by 1 million sq. meters by 2026, a report showed.
According to global property consultancy Knight Frank’s Autumn 2024 Saudi Arabia Commercial Market Review, this will bring the city’s total office space to 6.3 million sq. meters.
The regional HQ program also impacts office lease rates, with 517 companies now committed to establishing their primary hub in the Kingdom, the report disclosed.
This comes ahead of the nation’s goal of attracting approximately 480 multinational corporations to move their headquarters to the Kingdom by 2030.
“Vision 2030 is reshaping Saudi Arabia’s economy and society, with a central focus on transforming Riyadh into a key regional and global center for business, finance, leisure, and tourism,” said Faisal Durrani, partner and head of research for the Middle East and North Africa at Knight Frank.
“Indeed, 49 percent of the new jobs created in the Kingdom over the last five years has been in Riyadh, which is adding to the upward pressure on office rents, with many key office districts and business parks fully leased, with waiting lists,” Durrani added.
He went on to say that the limited availability of office space is also forcing up Riyadh’s Grade B rents, which have climbed by 27 percent over the past year.
In the Dammam Metropolitan Area region, Grade A rents have climbed by 2.2 percent since the third quarter of 2023, fueled mainly by strong demand from the public sector, he added.
The Knight Frank report further showed that Riyadh recorded the highest national increase in Grade A office lease rates over the past 12 months, rising by 31 percent to around SR2,604 ($693) per sq. meter.
This was followed by a 2.9 percent increase in Jeddah and a 2.2 percent increase in Dammam Metropolitan Area.
The report also highlighted steady growth in Jeddah’s office market over the 12 months leading to the third quarter of 2024.
Rising office demand led to rent increases, with Grade A rents climbing 2.9 percent to SR1,235 per sq. meter, and Grade B rents rising 3.8 percent to SR810 per sq. meter compared to the same period in 2023.
Occupancy in Grade A offices in Jeddah fell slightly by 1 percentage point to 94 percent, while Grade B occupancy grew by 2 percentage points, reaching 90 percent.
In 2021, the Saudi government announced plans to limit contracts with foreign companies that do not have regional headquarters in the Kingdom.
In early 2022, the Saudi Ministry of Investment introduced new guidelines on the Invest Saudi portal to incentivize companies to set up regional headquarters in the Kingdom.
Later that year, the Saudi Ministry of Finance issued new regulations restricting government agencies from doing business with global firms that do not have regional headquarters in the Kingdom.
