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RIYADH: Riyadh offices have hit 96 percent occupancy, reaching the highest level in five years, as the Saudi capital witnessed a massive surge in the number of foreign business licenses. 

According to the latest analysis by real estate consultancy firm Knight Frank, most of the prime office buildings in the city are now experiencing an unprecedented level of demand. 

“Businesses from the world over continue to clamor for a piece of the unfolding economic transformation in Saudi Arabia,” said Faisal Durrani, head of Middle East Research, Knight Frank. 

He pointed out that the number of international business licenses surged by 358 percent last year, with most of the demand concentrated on the capital, Riyadh.

This has resulted in office space rents in Riyadh rising by 6.5 percent in the last 12 months. 

“With occupiers globally focused on best-in-class office space as a tool in the war for talent and to satisfy internal ESG considerations, Riyadh’s prime office buildings are experiencing unprecedented levels of demand,” said Durrani. 

Jeddah office market steady

Saudi Arabia’s other major city Jeddah has also started to see office space demand increasing slowly but steadily, the Knight Frank report noted. 

This resurgence is being underpinned by the presence of new real estate projects which includes ROSHN, Uptown Jeddah, Al Ballad Development, and Jeddah Central, which all opened new offices in Jeddah. 

“We have seen a slow, but steady reversal in decisions to reduce office footprints in Jeddah that were taken during the pandemic. As we slowly move past COVID-19, businesses are rapidly returning to the office on a full-time basis, catalyzing the growing demand for offices in Jeddah,” said Talal Raqqaban, partner – Valuations & Advisory at Knight Frank. 

Prime office rents in Jeddah too increased by 2.5 percent during Q1, while Grade B rents experienced a decline of 0.5 percent over the same period, according to the Knight Frank report.

International retailers investing in the Kingdom

The retail sector is also growing steadily in Saudi Arabia, the report noted, adding that of the 2,056 foreign investment licenses issued in the fourth quarter of 2021, 44 percent were linked to the retail and e-commerce sector. This indicates the strong appetite of international retailers to invest in the Kingdom, it said.

Pedro Riberio, head of KSA Retail Advisory, at Knight Frank, said: “We have noted a steady stream of requirements from international retailers looking to enter the Kingdom, with a focus on Riyadh, putting upward pressure on rents.” 

He said malls are the primary target for these new entrants and regional and super-regional mall lease rates are beginning to creep up as new requirements gather pace. 

The report also added that the retail landscape in Saudi Arabia is witnessing a massive transformation where traditional retailers are encountering challenges due to increased e-commerce penetration and change in consumer behavior.