Staff Report
Dubai, UAE
Impelled by heightened demand and rental increase in the third quarter of 2024, Riyadh is set to supply 1.6 million square metres of Grade A office space by 2028. The market growth will underscore economic expansion of Saudi Arabia, which is projected for 1.4 percent growth this year.
According to Savills Q3 2024 Riyadh Office Market report, Riyadh’s efforts for economic diversification have transformed the city into a pivotal business hub, attracting international investors. Foreign direct investment (FDI) in Saudi Arabia saw a notable quarterly increase of 23.4 percent in Q2 2024, totalling SR11.7 billion (Dh11.45 billion), underscoring strong investor confidence. Additionally, over 120 foreign companies, including major players like Goldman Sachs and Frost & Sullivan, have moved their regional headquarters to Riyadh this year. This trend highlights Riyadh’s appeal as a premier regional hub for international business.
Amjad Saif, Head of Transactional Services at Savills Middle East, said, “The evolution of Riyadh’s office market is a clear indicator of the city’s pivotal role in advancing Vision 2030. We’re seeing a diverse range of sectors drawn to Riyadh’s business environment, with heightened demand for high-quality office spaces. This increased activity reflects the city’s position as a strategic gateway for companies aiming to establish a long-term foothold in the Middle East.”
The city’s office market recorded impressive occupancy rates, with Grade A spaces reaching 98 percent, reflecting high demand for premium office locations. Average rental values for Grade A office space have seen 2 percent quarter-on-quarter rise and a substantial 10 percent year-on-year growth, with key areas experiencing increases of up to 19 percent. Savills reported strong leasing activity with Technology, Media, and Telecommunications (TMT) sector accounting for 40 percent of transactions. Consulting and Fast-Moving Consumer Goods (FMCG) sectors followed, each contributing 20 percent.
Additionally, incentives from Saudi Arabia’s Regional Headquarters (RHQ) program, such as Saudisation exemptions, tax benefits, and accelerated visa processing, make Riyadh even more attractive to foreign companies. The upcoming 2025 investment system update is expected to ease regulatory restrictions and enhance investor rights, further cementing the Kingdom’s business appeal.
With demand growing, Savills reported a significant rise in inquiries for flexible workspaces, particularly for office spaces under 250 square metres, which accounted for 48 percent of inquiries. This trend reflects companies’ preferences for adaptable work environments, aligning with hybrid working models.
Ramzi Darwish, Head of KSA at Savills Middle East, said, “Riyadh’s office market is quickly emerging as a regional powerhouse for business growth, supported by rising demand for premium office spaces and a robust economic outlook. The combination of high occupancy rates and escalating rental values demonstrates Riyadh’s appeal to both regional and international companies, especially those looking to capitalise on the Kingdom’s pro-business environment and regulatory advancements.”
To address the high demand, Riyadh is set to add over 1.6 million square metres of Grade A office space by 2028, with major developments such as Prince Mohammed Bin Salman Nonprofit City and Diriyah Gate expected to reshape the city’s office landscape. The expansion of these zones will likely moderate rental growth and provide tenants with more choices in the years to come.
Ends
Also read: Saudi Arabia’s office market fuels economic growth in Q4 2023
