RIYADH: The office market in Riyadh continued its success in the second quarter of 2024, thanks to investment incentives from the government attracting international companies to establish regional headquarters.
According to the latest Saudi business market report by Savills, more than 120 international companies moved their regional headquarters to the Kingdom's capital in the first quarter of this year, marking an increase 477 percent compared to the same period in 2023.
The move comes after the Saudi government announced various benefits for companies setting up Middle East bases in Riyadh, including a 30-year exemption from corporate income tax, the withholding tax on activities in the center, as well as discounts and support services.
Ramzi Darwish, head of Saudi Arabia at Savills Middle East, said: “The Kingdom's ongoing efforts to boost its revenue and create an attractive business environment are proving to be successful, according to evidenced by a large number of international studies.”
He added: “In the second quarter of 2024 alone, almost 70 per cent of inquiries received by Savills came from outside Saudi Arabia, with a large proportion of 50 per cent hundreds from US and UK companies.”
This increase in employment was driven by sectors such as technology, media and telecommunications, consulting and engineering, manufacturing and IT, with 50 percent of negotiations with new participants, which reflect the positive feelings of expansion.
The English property advisory firm noted that this trend is expected to continue, supported by a strong survey pipeline for the remainder of the year.
The report also noted that the increase in rental activity in the capital led to rental prices in Riyadh North and North-East seeing an annual increase of 23 percent and 20 percent, respectively.
These price increases sit with foreign direct investment in the city that rose 5.6 percent annually in the first quarter of 2024.
“Riyadh's limited prime office space, coupled with strong business confidence, has resulted in Grade A occupancy of 98 percent, and rents are steadily increasing, up 3 percent from quarter in Q2 and a significant increase of 13 percent year-on-year,” said Amjad Saif, head of commercial services at Savills in KSA.
Savills noted that the city's market growth and promising economic prospects are attracting major companies from various industries, reinforcing Riyadh's role as a major hub for regional and global trade.
He also noted that famous companies such as PayerMax and Ernst & Young have established their regional headquarters in the Kingdom.
Other notable companies include Northern Trust, Bechtel, and PepsiCo, as well as IHG Hotels & Resorts, PwC, and Deloitte.
Riyadh office market
The UK-based firm noted that limited prime office space in Riyadh led to a Grade A occupancy rate of 98 percent at the end of the second quarter, with these properties commanding higher rents than its location, modern infrastructure and new construction.
“This trend is a reflection of the booming office market in the Saudi capital. However, due to strong demand, a significant increase in Grade A office supply is expected by the end of 2025. This influx of more than 650,000 square meters of new space is expected to improve tenant choice. and to mitigate the risk of supply shortages,” Savills said in the report.
The survey noted significant hiring activity in the second quarter of this year, led by engineering and manufacturing companies, followed by legal services and pharmaceutical companies.
According to Savills, around 60 percent of rental inquiries focused on office space under 1,000 square meters, indicating a growing preference for a dynamic and efficient working environment.
Non-oil sector
Savills noted that Saudi Arabia's non-oil sector has emerged as a major economic leader, growing 3.4 percent in the first quarter of 2024 compared to the same period last year. dasa.
The company noted that Saudi Arabia's average inflation rate of 1.6 percent in May is a good sign for the non-oil business world.
Savills, citing data from S&P Global and Riyad Bank, added that the purchasing managers' index remained steady in the expansion zone at 56.4 in May, marking the fourth month -45 in a row above the neutral threshold of 50, which indicates the growth of the private sector of the State.
The latest S&P Global report on July 3 revealed that the PMI stabilized at 55, driven by increased demand, higher productivity levels and an increase in employment.
In the report, Naif Al-Ghaith, chief economist of Riyad Bank, noted that the growth rate for the second quarter suggested a positive outlook for the economy. non-oil sources in Saudi Arabia, with an expectation of growth of more than 3 percent.
He noted that the success of the non-oil sector during the three months continued economic growth and various efforts in the country.
In another report published earlier this month, Savills noted that Riyadh is expected to be among the top 15 fastest growing cities in 2033, driven by a population increase of 26 percentage and ongoing infrastructure spending.
The analysis highlighted that Riyadh is the only non-Asian city on the list, with a population increase from 5.9 million to 9.2 million over the next decade.
In May, S&P Global also announced that the establishment of free economic zones and regional center programs could further increase the inflow of foreign direct investment into the country. the State.
