Saudi Arabia’s real estate market set to benefit from major tourism projects and reforms: JLL reports
The recent launch of international tourist e-visas in Saudi Arabia, as part of Vision 2030 initiatives to boost tourism and increase global competitiveness, is set to have a positive long term impact on the Kingdom’s real estate market, outlines JLL’s latest Q3 market reports.
In efforts to diversify the economy away from oil the government launched tourism giga-projects across the Kingdom and most recently new E-Visas for 49 countries to boost international visitor arrivals. These major initiatives and ongoing reforms are set to shape a more diverse hospitality landscape, stimulating real estate development and new investor opportunities.
“With the Kingdom opening up to more international tourism there is a positive long-term outlook for the hotel sector in particular, with the pipeline expected to grow in the next 12 months on the back of continued investments in infrastructure and the entertainment and tourism developments,” said Dana Salbak, Research Director, JLL MENA.
Evolving tourism demographics are set to have a positive long term impact on the hotel sector. Traditionally driven by religious and domestic travel the hospitality landscape is evolving to attract a wider tourist base with a future pipeline consisting of more luxury hotels and resorts.
“Increased demand for a more diverse hotel pipeline is expected to drive future investments and trigger large-scale real estate development by the public and private sectors. The anticipated influx of international tourists also has the potential to boost spend in the retail and entertainment sectors and stimulate job creation,” she continued.
This quarter Riyadh saw occupancy rates improve to 54% YT August 2019 versus 52% YT August 2018 while average daily room rates (ADR’s) dropped 9% to register USD 155 (SAR 581) in the YT August 2019. The upcoming Riyadh season events are expected to create more activity in the sector.
In Jeddah, hotel occupancy rates declined marginally to register 60% in the YT August 2019 versus YT August 2018. Meanwhile, ADR’s and revenues per available room continued to soften. Several hotels are expected to be completed by year-end.
“We are witnessing an exciting and major turning point for the Kingdom’s tourism industry, with new economic reforms opening the doors to leisure and business travelers across the globe. The evolving landscape is stimulating a wave of future investment and development opportunities, driving momentum in the hospitality and wider real estate sector,” said Thierry Delvaux, CEO, JLL, MEA.
This quarter sale prices and rental rates in the residential sector continued to witness a slowdown, albeit marginally, indicating further signs of the market reaching the bottom of its cycle. However, there is a positive long-term outlook as current dynamics are expected to pick up on the back of housing initiatives tackling the shortage of affordability.
As the Kingdom continues to push ahead with giga-projects and encourage private sector participation in the economy, the office market is expected to regain some momentum, particularly high quality Grade A office space with better connectivity and amenities.
In turn, the retail market continued to see a mixed performance, with rents in super regional malls offering a mix of entertainment and F&B remaining stable, rental decreases were noted in the regional and community centers.
JLL’s 2019 Q3 Jeddah and Riyadh reports provide an overview of the KSA real estate’s market performance across the residential, office, retail and hotel sectors, in light of macro-economic factors and new government initiatives affecting the market’s future outlook.