The decline in Saudi Arabia’s real estate sector due to COVID-19 will see the excess supply flowing into the market in 2021, while landlords will witness demand for co-working spaces as employees continue to adopt a hybrid working system.
As per a recent report from real estate consultancy service JLL, only 150,000 square meters of the gross leasable area was finished within the office market during last year, representing a 67 percent fall from the last three years’ average.
The Kingdom’s capital city’s office market is projected to witness the delivery of almost 430,000 square meters of office space this year, with the majority being Grade A quality units. But as per JLL’s report, this amount was unlikely to come out as the landlords are reevaluating market conditions and delaying projects or putting them on hold.
“However, in the medium-to-long term, with employment figures expected to bounce back, corporates are likely to reemphasize the value-add of office spaces. We expect this will have a positive impact on quality office spaces,” the report stated.
According to JLL’s predictions, the corporates will rely more on hybrid working models amid the pandemic which means that a continued combination of remote and office working for most employees. The landlords may look to remodel existing space to fit into the requirements of the conversion work, with traditional offices being modernized into co-working spaces, especially in places close to large residential areas.
The JLL report was compiled before last week’s announcement that Riyadh aimed to double its population and to position itself among the top 10 richest cities in the world, following ambitious plans unveiled by Crown Prince Mohammed bin Salman at the Future Investment Initiative (FII) conference held in the capital.
“We are therefore aiming to make Riyadh one of the 10 largest city economies in the world,” the crown prince said. “Today it stands at number 40, the 40th largest city economy worldwide. We also aim to increase its residents from 7.5 million today to around 15-20 million in 2030.”
As per media reports, about 24 multinational companies including PepsiCo, Schlumberger, Bechtel and Boston Scientific had decided to set up regional headquarters in Riyadh as part of this plan.
