RIYADH: Saudi Arabia’s hospitality industry showcased resilience in the first quarter of 2026 amid regional geopolitical and economic uncertainty, with nationwide occupancy reaching 66.3 percent and average daily rates rising 3 percent to SR805.5 ($215.37).
While revenue per available room dipped slightly by 1.3 percent, domestic tourism and religious pilgrimages provided vital support to the Kingdom’s hospitality sector during the quarter, according to JLL.
The holy cities of Makkah and Madinah remained anchors of stability, recording occupancies of 78.6 percent and 81.3 percent, respectively, bolstered by Umrah demand and Ramadan travel.
Strengthening the real estate and hospitality sector is one of the key objectives outlined in Saudi Arabia’s Vision 2030, as the Kingdom aims to establish itself as a leading tourist and business destination by the end of the decade.
The country’s Real Estate General Authority expects the Kingdom’s property market to reach $101.62 billion by 2029, with an anticipated compound annual growth rate of 8 percent from 2024.
Saud Alsulaimani, country CEO and head of capital markets, Saudi Arabia at JLL, said: “Saudi Arabia’s real estate market is evolving with purpose. Industrial and logistics is operating at near-full capacity, reflecting the Kingdom’s emergence as a critical node in regional and global supply chains.”
In the office sector, prime office vacancy in Riyadh remained exceptionally low at around 3.2 percent across all grades.
The King Abdullah Financial District led rental growth in Riyadh, with prime rents rising 5.5 percent year on year, while Grade A rents increased 2.1 percent and Grade B rents grew 5.1 percent.
Jeddah recorded a Grade A vacancy rate of 6 percent, with Grade A rents declining 3.8 percent as tenants migrated to newer assets.
The Dammam Metropolitan Area showed improving conditions, with Grade A vacancy at 21.4 percent and Grade B at 17.3 percent, alongside healthy rental growth of 9.2 percent and 8.7 percent, respectively.
Industrial and logistics stood out as key growth areas, with near-full capacity utilization, achieving above 90 percent occupancy in key markets, and strong rental growth across major cities — 5.1 percent in Riyadh, 5.3 percent in Jeddah, and 9.9 percent in the Dammam Metropolitan Area.
Saudi Arabia’s retail sector delivered robust results in the first quarter, particularly in prime formats across Riyadh and Jeddah. This growth was driven by multiple factors, including sustained population growth, increasing tourism arrivals, and rising consumer spending.
Riyadh’s super-regional malls maintained a very low vacancy rate of 2.1 percent, while regional and community malls stood at 9.7 percent and 10.4 percent, respectively.
“Looking ahead, Riyadh’s retail real estate sector is positioned for long-term growth, underpinned by destination malls and mixed-use developments, alongside sustained population expansion, though near-term footfall may be affected by temporarily reduced business and leisure travel,” added JLL.
In the first quarter, Saudi Arabia’s residential sector experienced a sharp contraction in transaction activity across major cities, driven by regional geopolitical tensions, economic uncertainty, and recent regulatory changes.
In Riyadh, residential transactions declined by 54.4 percent, followed by Jeddah and Dammam, which experienced declines of 51.8 percent and 18.6 percent, respectively.
