REAL ESTATE MARKET REVIEW
Saudi Arabia
Real Estate
Market Review
Q2 2023
Saudi Arabia s real estate
sector saw its positive
momentum continue in
the second quarter of
2023
CBRE RESEARCH
AUGUST 2023
FIGURES | SAUDI
ARABIAARABIA
REAL ESTATE
MARKET
REVIEW
AND OUTLOOK
Q2 2023
FIGURES
| SAUDI
REAL
ESTATE
MARKET
| Q2 |2023
Saudi Arabia s real estate sector saw its
positive momentum continue in the second
quarter of 2023
1.1%
2.7%
11.9%
44.4%
12.2%
59.6
Forecast increase in GDP
in 2023
Rate of inflation in
June 2023
Increase in total employment
in the year to Q1 2023
Increase in hotel RevPAR
in the YoY to June 2023
Growth in average Grade A office
rents in Riyadh year-on-year in
Q2 2023
PMI reading in June 2023,
up from 58.5 a month earlier
MACROECONOMIC OVERVIEW
FIGURE 1: Saudi Arabia, Gross Domestic Product
‒ Saudi Arabia s GDP has 1.1% growth forecast in 2023.
‒ June 2023 saw headline inflation stand at 2.7%, up from 2.3% compared to a year earlier.
‒ In Q1 2023, unemployment rate in Saudi Arabia has declined to 5.1%.
At the start of 2023, Saudi Arabia s GDP was forecast to grow by 2.5%. However due to multiple
oil output production cuts and lower oil prices, the latest forecasts from Oxford Economics
expect Saudi Arabia s GDP growth rate to now reach 1.1% by year end. The non-oil sector on the
other hand has seen its forecast growth rate remain stable at 4.7%.
The robustness of the non-oil sector can be seen in Saudi Arabia s Purchasing Managers Index
(PMI), where in June 2023 its reading reached 59.6, up from 58.6 a month earlier according to
S&P Global. This increase in the headline index has been underpinned by output and new orders
expanding at their fastest levels in roughly eight and nine years respectively, on the back of
strong level of both domestic and foreign demand. In turn, this has also led to employment
growth reaching its highest level since August 2015. These elevated activity levels are however
underpinning higher employment and production costs. However, due to the competitive nature
of the market, only a portion of these increases are being passed onto the end consumer.
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Source: CBRE Research/ Oxford Economics
© 2023 CBRE, INC.
FIGURES | SAUDI ARABIA REAL ESTATE MARKET REVIEW AND OUTLOOK | Q2 2023
MACROECONOMIC OVERVIEW
FIGURE 2: Saudi Arabia, Purchasing Managers Indices
June 2023 saw headline inflation stand at 2.7%, up from 2.3% compared to a year earlier. This
was largely due to the 10.8% uptick in housing and associated cost prices with actual rents
rising by 9.1%, which was accentuated by a 22.8% surge in apartment rents. In addition to this,
high and increasing rates of inflation of 4.3% and 1.0% in the restaurants & hotels and food &
beverages components of the index, respectively, have contributed to the rise in headline
inflation.
In Q1 2023, unemployment rate in Saudi Arabia has declined to 5.1% compared to Q1 2022 where
unemployment stood at 6.0%. Among Saudi nationals, the unemployment rate stands at 8.5%,
marking a decline of 1.6% over the past year. As for unemployment among non-Saudi nationals,
the rate dropped by 0.5% from the previous year to reach 1.7%. Saudi Arabia s total employment
increased annually by 11.9% in Q1 2023 to reach 15.4 million. In terms of the total number of
employees, non-Saudi nationals totaled 11.5 million and the Saudi totaled 3.9 million as at Q1
2023.
Source: CBRE Research/ Macrobond
FIGURE 3: Saudi Arabia, Labour Market, Total Employment
June 2023 saw headline inflation stand at 2.7%, up from 2.3% compared to a
year earlier. This was largely due to the 10.8% uptick in housing and
associated cost prices with actual rents rising by 9.1%, which was
accentuated by a 22.8% surge in apartment rents.
Source: CBRE Research/ Macrobond
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FIGURES | SAUDI ARABIA REAL ESTATE MARKET REVIEW AND OUTLOOK | Q2 2023
OFFICES
FIGURE 4: Saudi Arabia, Office Rents, YoY % Change to Q2 2023
During Q2 2023, occupier demand from international and government entities continued to be
prevalent in Riyadh, whereas demand in Dammam, Khobar and Jeddah remained lackluster in
comparison. However, due to varying degree of supply constraints in the Grade A segment of
these respective markets, they seem to continue to be very much landlord-favoured. This is
particularly the case in Riyadh, given the lack of incentives and stringent terms on offer. In the
meantime, international occupiers are electing hybrid work models as they await future stock to
come online, with around 260,000 square metres of quality supply projected to be delivered in
2024.
Office rents in Riyadh maintained strong performance levels, with Grade A rents growing by
12.2% year-on-year to Q2 2023, reaching SAR 1,839 per square metre. Furthermore, Grade B
average rents reached SAR 1,471 per square metre, marking a 14.4% annual rise over the same
period. During the second quarter, average occupancy for both segments also rose, with Grade
A occupancy reaching 99.9% and Grade B offices now standing at 99.4%.
In Jeddah, the Grade A segment recorded the highest rate of growth in rents among CBRE s
tracked cities, as average rents grew by 20.7% in the year to Q2 2023, standing on average at
SAR 1,313 per square metre. Jeddah s Grade B office rents improved marginally by 1.0% over the
same period, with average rents now at SAR 707 per square metre. Average occupancy for both
segments rose, as Grade A and Grade B occupancies now stand at 92.5% and 80.0%, up 4.8%
and 5.4% from a year earlier respectively.
Source: CBRE Research
FIGURE 5: Saudi Arabia, Office Occupancy, Q2 2023, %
The second quarter of 2023 saw average rents in Dammam and Khobar s office market remain
static across all segments compared to Q1 2023. On an annual basis, Dammam s Grade A rents
increased by 7.6% to an average rate of SAR 942 per square metre, while Grade B offices saw an
uptick of 1.6% to reach SAR 533 per square metre. As for Khobar, Grade A rents surged by 10.8%
to reach SAR 1,080 per square metre. In terms of average occupancy, the Grade A segments
registered 82.2% for Dammam and 81.0% for Khobar, while Dammam s Grade B office segment
stood at 67.6% at Q2 2023.
Source: CBRE Research
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FIGURES | SAUDI ARABIA REAL ESTATE MARKET REVIEW AND OUTLOOK | Q2 2023
RESIDENTIAL
FIGURE 6: Saudi Arabia, Number of Loan Contracts issued by Banks, May 2023
The total number of residential transactions fell by 38.1% in the year to June 2023, whilst the
total value of these transactions, which reached SAR 26.8bn, fell by 30.4% over the same period.
Year-on-year in the year to date to June 2023, the total number and total value of transactions
fell by 34.0% and 24.4% respectively.
Furthermore, according to the latest data available, year-on-year in the year to May 2023, the
total number of mortgage contracts issued highlighted a drop of 35.9%, and the total value of
these contracts fell 37.9% over the same period. The single-family homes segment represented
the largest share of loan contracts issued at 68.9%, followed by apartments at 25.5% and lands
at 5.6%.
In the 12 months to Q2 2023, apartment prices grew in Riyadh and Dammam, while contracting
in Khobar and Jeddah. The average prices for apartments in Riyadh rose by 22.9% to reach SAR
4,664 per square metre, while prices in Dammam increased by 2.4% to stand at SAR 2,852 per
square metre. Khobar and Jeddah saw price declines of 4.3% and 3.5%, resulting in average
apartment prices of SAR 3,417 and SAR 3,982 per square metre, respectively.
Source: CBRE Research
FIGURE 7: Saudi Arabia, Residential, Prices, Villas & Apartments, YoY % Change to Q2 2023
In terms of average villa prices, all four major cities saw prices rise in the year to Q2 2023.
Riyadh, Jeddah, Dammam and Khobar registered improvements of 3.9%, 5.0%, 20.0% and 2.3%
respectively. As a result, Riyadh s average prices rose to SAR 5,638 per square metre, while
Jeddah s average prices increased to SAR 5,662 per square metre. In the Eastern Province,
Dammam and Khobar s average villa prices rose to SAR 3,612 and SAR 3,678 per square metre
each.
Source: CBRE Research
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FIGURES | SAUDI ARABIA REAL ESTATE MARKET REVIEW AND OUTLOOK | Q2 2023
HOSPITALITY
Year-on-year in the year to date to June 2023, Saudi Arabia has produced positive headline
figures across the three key performance indicators. On a country level, Saudi Arabia saw an 8.4
percentage points rise in average occupancy and 25.2% growth in ADRs, resulting in an increase
of 44.4% in the country s RevPAR.
Major cities in Saudi Arabia have seen varying degrees of KPIs growth year-on-year in the year
to date to June 2023. In the capital, Riyadh registered a 1.2 percentage point increase in its
average occupancy rate accompanied by a 12.9% increase in ADR. This has led to RevPAR
increasing by 15.1%. Jeddah witnessed a 9.0 percentage points increase in average occupancy
and a 4.0% growth in ADR. This facilitated a 21.1% growth in its RevPAR. In Makkah and
Madinah, average occupancies rose by 11.3 and 14.9 percentage points, while ADRs surged by
41.0% and 42.6%, resulting in a RevPAR growth of 70.5% and 77.4% respectively. Finally, cities in
the Eastern Province saw a degree of fragmented performance in occupancy and ADRs. While
Dammam recorded growth in both its occupancy and ADR, Khobar saw a softening in ADR but
saw a sharp increase in occupancy. Despite the softening in Khobar s ADR, both Dammam and
Khobar recorded a RevPAR increase of 6.1% and 8.7% respectively.
200
ADR June 2023 indexed to June 2019
On the whole, in the year to date to June 2023 compared to the same period in 2019, KPIs
across Saudi Arabia now stand, in most cases, comfortably above their pre-pandemic baselines.
Over this period, the average occupancy rate is now 2.8 percentage points higher, while ADRs
have increased by 27.9% and resultantly, we have seen a 33.8% increase in RevPAR.
FIGURE 8: Saudi Arabia, ADR & Occupancy, June 2023 indexed to June 2019
Madinah
180
160
140
Makkah
120
100
80
ADR Outperformance
ADR and Occupancy
Outperformance
ADR and Occupancy
Underperformance
Pre-COVID
Benchmark
80
Jeddah
ADR Outperformance
RevPAR Index to 100
60
Riyadh
85
90
95
100
105
110
Occupancy June 2023 indexed to June 2019
115
120
125
130
Source: CBRE Research/ STR Global
FIGURE 9: Saudi Arabia, Hospitality Market, KPIs, YoY % Change
Year to Date - June 2023 vs June 2019
Occ PP Change ADR % Change
RevPAR %
Change
Year to Date - June 2023 vs June 2022
Occ PP Change ADR % Change
RevPAR %
Change
Saudi Arabia
2.8%
27.9%
33.8%
8.4%
25.2%
44.4%
Al Khobar
-
-
-
6.8%
-3.2%
8.7%
Dammam
-
-
-
1.9%
2.4%
6.1%
Jeddah
7.2%
-11.4%
-0.1%
9.0%
4.0%
21.1%
Makkah
-1.8%
43.4%
39.7%
11.3%
41.0%
70.5%
Madinah
14.2%
77.6%
118.4%
14.9%
42.6%
77.4%
Riyadh
5.1%
22.9%
33.9%
1.2%
12.9%
15.1%
Source: CBRE Research/ STR Global
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FIGURES | SAUDI ARABIA REAL ESTATE MARKET REVIEW AND OUTLOOK | Q2 2023
INDUSTRIAL
FIGURE 10: Riyadh, Industrial Rents Q2 2023, SAR per Square Metre
The second quarter of 2023 saw the continuation of efforts to transform the industrial and
logistics landscape in Saudi Arabia, where the Kingdom is targeting to increase the sector s
contribution towards GDP to 10% by 2030. In April 2023, such initiatives to improve the sector
have culminated in the World Bank upgrading the Saudi Arabia s ranking in its Logistics
Performance Index to 38th globally, up from 52nd from the previous rankings. With marked
uniform improvements across all components of the index, we are starting to see occupational
activity in the sector begin to grow rapidly. For example, in Q2 2023 alone, we have seen
Riyadh s Special Integrated Logistics Zone (SILZ) become the base of operations for a host of
multiple global organisations including CJ Logistics and iHerb. More so, in Jeddah, over 10
million square metres of land has been allocated to industrial use aiming to capitalise on its
proximity to King Abdullah Economic city (KAEC) and King Abdullah Port.
In terms of performance, average industrial and logistics rents in Riyadh, Khobar and Dammam
have seen rental growth in the year to Q2 2023. Jeddah was the only location to defy this trend.
During this period, Dammam and Khobar recorded the highest average rent among the tracked
cities at SAR 250 per square metre, which represents an increase of 20.2% in Khobar and 18.7%
in Dammam in the 12 months to Q2 2023.
Source: CBRE Research
FIGURE 11: Saudi Arabia, Industrial Rents Q2 2023, SAR per Square Metre
Riyadh s average rent saw a marked improvement by 36.9% in the year to Q2 2023 standing at
SAR 198 per square metre. While we have seen a strong rate of growth on an annual basis, the
quarterly data is indicating some signs of moderation. More so, within the city, Western Riyadh
represented the lowest average cost in the city of SAR 158 per square metre, while the highest
average price was SAR 261 per square metre in Eastern Riyadh.
In Jeddah, average rents softened by 10.4% during the year to Q2 2023, where average rents
now stand at SAR 181 per square metre. While rents have fallen on an annual basis, average
rents grew on a quarterly basis by 1.1%.
Source: CBRE Research
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Contacts
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Henry Chin, Ph.D.
Global Head of Investor Thought
Leadership & Head of Research, Asia Pacific
henry.chin@cbre.com.hk
Pedro Ribeiro
General Manager, Saudi Arabia
+966 55 269 0736
pedro.ribeiro@cbre.com
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Head of Valuation
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Head of Research, India, Middle East &
North Africa
abhinav.joshi@cbre.co.in
Richard Barkham
Global Chief Economist, Head of Global
Research & Head of Americas Research
richard.barkham@cbre.com
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