A recent report highlights the persistent supply constraints in Saudi Arabia’s real estate market, contributing to significant increases in both office rents and residential property prices throughout 2023.

CBRE’s latest findings reveal a notable surge in average office rents for Grades A and B units in Riyadh, with rates soaring by 13% to 22.2% over the twelve months leading up to the fourth quarter of 2023. Meanwhile, occupancy rates remained exceptionally high, ranging between 99.4% and 100%. Villa prices witnessed a remarkable uptick of up to 5.5%, while apartment prices surged by as much as 10.7% during the same period.

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The Saudi Arabia Real Estate Market Review for Q4 2023 by CBRE underscores the continuous rise in villa prices across major cities, coupled with a substantial 63.7% increase in residential real estate transactions compared to the previous year’s corresponding period.

Taimur Khan, Head of Research – MENA at CBRE, notes that demand consistently surpasses supply across various real estate sectors in Saudi Arabia, resulting in robust market performance despite prevailing economic challenges.

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Despite the anticipation of new unit deliveries, Khan predicts that the real estate market’s supply level will continue to lag behind demand in the coming year, ensuring sustained strong performance.

In Riyadh, all office grades experienced rent hikes in the lead-up to Q4 2023, with Prime units witnessing a 20.7% increase, and Grades A and B units recording increases of 13% and 22.2%, respectively. Notably, the King Abdullah Financial District (KAFD) observed a substantial leasing surge, with approximately 65% of its space leased, indicating heightened demand from both domestic and international tenants.

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Outside Riyadh, Jeddah experienced robust demand, evidenced by a 19.7% increase in Grade A office rents. Additionally, Grade A and Grade B office occupancy rates in Jeddah rose to 92.5% and 82.1%, respectively.

The Eastern Province witnessed similar trends, with Grade A office rents increasing by 7.4% and 7.2% in Dammam and Khobar, respectively, accompanied by high occupancy rates nearing full capacity.

In the residential sector, Riyadh, Jeddah, Dammam, and Khobar saw average villa price increases ranging from 0.3% to 5.5% in the year leading up to Q4 2023. Apartment prices also surged, except in Jeddah, where prices experienced a slight decline of 1.9%.

Overall, the relentless demand for real estate in Saudi Arabia continues to drive rent and price increases, with market dynamics favoring sellers and property owners amidst ongoing supply constraints.