Tuesday 25 July 2017
 
»
 
»
Story

Riyadh real estate market ‘softens in Q2’

RIYADH, 8 days ago

The real estate market in the Saudi capital Riyadh continued to ‘soften’ in the second quarter, with further declines in performance across the office, residential, retail and hotels sectors, according to JLL, one of the world’s leading real estate investment and advisory firms.

The residential sector experienced slight declines in both rentals and sale prices in Q2, stated the property expert in its Q2 2017 Riyadh Real Estate Market report released today (July 17).

However, the Ministry of Housing has collaborated with six private developers to increase the supply in order to address the growing demand for affordable housing, it added.

One such agreement is with Dawaween Al Jazeerah to construct around 4,500 units in southern Riyadh. In addition, the Saudi Arabian Real Estate Company is expected to begin the off-plan sales of the Dhahiah Project, (a gated community comprising more than 500 villas, under the Wafi program) in H2 2017.

On the other hand, lower demand for high-end projects has caused some developers to hold back on construction, while others have reduced the scale of projects by selling vacant parcels they initially planned to develop themselves.

On the supply scenario, JLL said the total stock of residential units in Riyadh stands at 1,170,000 units. Between 2013 and 2016, almost 80,000 units completed (at an average of 27,000 units pa).

The rate of supply is expected to remain stable over the next 3 years with a potential 77,000 units (averaging 26,000 pa), it added.

AlArgan delivered 50 of the 156 villas situated in its Al Qamrah project in Q2, with the remaining 106 villas expected to complete by the end of the year.

The same developer also completed 40 of the 140 villas in its Manazil Ash Shurouq project, they are aiming to complete the remaining 100 villas in this project by year end, along with 498 villas and 732 apartments in the Green Oasis project in 2018, said the JLL in its report.

Other proposed completions by the end of 2017 include Damac Esclusiva and Damac Tower by Paramount, adding 189 and 252 high end apartments respectively.

Al Tahaluf Real Estate are scheduled to deliver 139 villas in Bayt Al-Hurr 1, and  Malathek, (85 apartments on King Fahed Road in the An Namudhajiyah district) are also due to complete in 2017. Tabarak Holding’s Aali Ar Riyadh (129 apartments) is one of the major completions scheduled for Q1 2018, it said.

According to JLL, the residential sector experienced slight declines in the second quarter.

The number of transacted apartments and villas fell by 19 per cent and 41 per cent respectively in Q2 2017 compared to the same period in 2016 Y-o-Y. 

Marginal falls were recorded in both rents and sale prices in both the villa and apartment markets in Q2. The 12-month outlook remains unfavorable, with further declines in both prices and rentals expected.

On the retail sector, JLL said the shopping centre owners remain positive and continued with expansion plans, with a sharp focus on ‘shoppertainment’, .

While some owners are looking to encourage their tenants to operate cinemas for children, others are enhancing common areas within malls as a way of attracting greater footfall, it stated.

“The market overall experienced a general slowdown in Q2, with the government looking to boost the hospitality and retail sectors through promising policies,” remarked Jamil Ghaznawi, the national director and country head at JLL, Saudi Arabia.

“With these crucial changes in the government, and foreign investment through trade deals signed during Trump’s historic visit, the market sentiment is likely to improve as we move into the second half of the year,” he noted.

The office sector witnessed completions including Elegance tower and Ghirnata Square, bringing the total office space up to 3.8 million sq m. With demand being limited, the office sector experienced increasing vacancies and a slight decline in rentals.

On the hospitality sector, the expert said there were no major openings in the hotel sector across Riyadh in Q2, but the pipeline for the second half of the year remains strong with major scheduled openings inclusive of the Crowne Plaza ITCC, Centro Waha and the Fraser Suites.

The pipeline for the second half of the year stands at around 1,900 rooms, with major scheduled openings including the  Crowne Plaza ITCC, Centro Waha and the Fraser Suites in the serviced apartment market.

While the total supply of rooms could surpass 16,000 by the end of 2019, further delays in materialization are likely, said JLL in its Q2 report.

The hospitality market in Riyadh is expanding into satellite areas with mega-projects such as KAFD and ITCC increasing the supply of hotel rooms to the north of the city, it noted.

According to JLL, the Riyadh's hospitality market remained under-pressure in Q2.

In spite of the visit of US President Trump and the accompanying GCC summit in May, the market witnessed a continued softening in performance compared to last year.

The occupancy rates decreased from 63 per cent to 59 per cent YT May, while ADRs dropped from $219 from $193.

Macro-economic factors including low-oil prices have negatively affected the business dynamics in the capital, as the Riyadh hospitality market remains highly dependent on the government and corporate segments.

In its conclusion, JLL said generally, all sectors of the real estate market were now in the downturn stage of their market cycle, with rents and prices decreasing.-TradeArabia News Service




Tags: hotels | real estate | retail | market | Riyadh | JLL |

More Construction & Real Estate Stories

calendarCalendar of Events

Ads