Savills Riyadh: Q3 Market Thrives - Strong Growth and Rental Surge Drive Sector

Riyadh’s office market is thriving, fuelled by surging demand and increasing rental values, as outlined in the Savills Q3 2024 Riyadh Office Market Report. The city's strategic focus on diversifying its economy, particularly by expanding non-oil sectors, has positioned Riyadh as a dynamic business hub. This approach continues to draw a steady influx of global companies seeking opportunities in the Kingdom.

Economic Indicators Signal Robust Growth

Riyadh’s economic outlook for 2024 is promising, with GDP expected to grow by 1.4%, bolstered by a 5% increase in non-oil activities and stable inflation at 1.7%. Foreign Direct Investment (FDI) has been a key driver, with a remarkable 23.4% quarterly increase in Q2 2024, amounting to SR11.7 billion. Over 120 international companies, including prominent names like Goldman Sachs and Frost & Sullivan, have established their regional headquarters in Riyadh this year, reinforcing the city’s growing appeal as a premier business destination.

Rising Demand for Grade A Office Spaces

The demand for premium office spaces in Riyadh is unprecedented. Grade A occupancy rates have soared to 98%, reflecting the intense competition for high-quality office locations. Rental values for these spaces have experienced substantial year-on-year growth, with prime areas seeing increases of up to 19%. Industries such as Technology, Media, and Telecommunications (TMT) dominate leasing activity, accounting for 40%, followed by the Consulting and FMCG sectors, each at 20%.

“The evolution of Riyadh’s office market is a clear indicator of the city’s pivotal role in advancing Vision 2030,” said Amjad Saif, Head of Transactional Services at Savills Middle East. “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.”

Incentives Boost Riyadh’s Global Appeal

Saudi Arabia’s Regional Headquarters (RHQ) program has played a pivotal role in attracting foreign businesses. Key benefits, including Saudization exemptions, tax advantages, and expedited visa processing, have incentivized companies to relocate to Riyadh. Upcoming reforms in the 2025 investment system, aimed at reducing regulatory hurdles and strengthening investor rights, are expected to further enhance the Kingdom’s appeal as a global business hub.

Flexible Workspaces on the Rise

A growing interest in flexible workspaces highlights shifting corporate needs. According to Savills, inquiries for smaller office spaces, particularly those under 250 square meters, accounted for 48% of total inquiries. This reflects a trend toward adaptable work environments, aligning with the global shift to hybrid working models.