According to JLL's latest KSA Real Estate Market Performance survey, new, relaxed rules, and measures taken to lure multinational firms, are expected to have a positive effect on demand for commercial property in the medium-to-long term.

The Royal Commission for Riyadh declared earlier this year a goal of attracting up to 500 multinational corporations to establish regional headquarters in Riyadh during the next ten years. That's in response to the introduction of the new sponsorship scheme, because of which emigrant employees will be allowed to have job autonomy and the right to enter and leave the Kingdom without any need for permission from their boss.

“Going ahead, these policies are bound to attract more global expertise, boost economic regeneration, and generate more jobs, putting the Kingdom on a sustainable development path. “In the longer term, we anticipate it to positively drive demand in the office market,” said Dana Salbak, head of research at JLL MENA. The office sector saw the implementation of two corporate office ventures in Riyadh during the first quarter of 2021, raising overall stock by about 50,000 sq m to 4.4 million sq m of GLA. Two smaller new arrivals in Jeddah held the stock at 1.1 million square meters unchanged.

The residential sector experienced growing demands in the first quarter of the year, owing to strong government funding. Person residential new mortgage loans increased 33,000 contracts in January 2021, continuing a recent trend. According to the Saudi Arabia Monetary Agency, the overall amount of mortgages raised reached SR16.4 billion (SAMA). In terms of supply, the first quarter saw a spike in building production, with about 7,700 and 2,000 units passed over in Riyadh and Jeddah.

Retail rents in Riyadh remained under strain, with average rentals for super-regional malls falling by 9% year on year in Q1 2021. Regional centers declined at a lesser rate of 3% over the same period. Retail rents in Jeddah decreased by 3% year on year for super-regional retail centers and 1% for retail outlets.

Significant retail projects are expected to continue providing benefits to tenants to retain dwelling units and recruit new retailers to provide diversity and boost footfall. In the hotel industry, occupancy rates reached 51% in the year to (YT) February 2021, while average daily rates (ADR) fell to $151 in Riyadh. Similarly, in Jeddah, occupancy rates fell to 38 %. ADR in Jeddah appears to be higher than in Riyadh, revenue per available room (RevPar) in Jeddah fell significantly, reaching $70 in the YT February 2021.

“The recently announced updated guidelines by the Ministry of Tourism to improve tourism accommodation facilities following the general strategy to grow national tourism may act as an opportunity for investors and new market entrants to recognize Saudi Arabia's huge potential in the service industry,” Salbak added.