Market Research Reports - Ken Research Supply Demand Gap Riyadh Office | Page 2

economy. Riyadh will continue to lead the office real estate market in Saudi Arabia followed by
Jeddah.
Factors Influencing the Sector of Office Space Demand in Saudi Arabia
Declining contribution of oil and gas sector mainly due to fall in oil prices has forced the
government to look for other alternatives that can help in sustaining the economy. During 2012
to 2016 the share of GDP contribution from mining of crude petroleum and natural gas declined
from ~% in 2012 to ~% in 2016 mainly due to fall in prices in the global market. The number of
people employed in services sector increased from ~ million in 2012 to ~ million in 2016
registering a constant increase in number of people in services sector thus creating additional
demand for office space. There has been constant rise in the number of industrial units
operating in Saudi Arabia increasing from ~ units in 2012 to ~ units in 2016.
Riyadh Office Real Estate market
The total office real estate supply in Riyadh increased from ~ million square meters during 2013
to ~ million square meters of gross leasing area during 2016, registering a CAGR of ~% during
the same period. Demand during the same period was lower than the supply. Total occupied
office space increased from ~ million square meters during 2013 to approximately ~ million
square meters during 2016, achieving a CAGR of ~% during the same period. Completion of
Alajlan Tower (~ Sq m) and Al Tamaiouz Tower (~ Sqm), Olaya towers, MIG tower made
significant contribution during the estimation period of 2013-2016. Constant oversupply in the
market has made the rental stay stable.
Average Rental Rates in Riyadh Office Real Estate Market
The rental rate charged by office real estate developers in Riyadh varies across different
building categories as well as location. It is evident that average rental rates across major
business streets such as King Fahad road and Olaya Street are much higher because of better
location and infrastructure facilities. Within these areas, the rent may vary depending on net
area under lease, whether the company is private or government owned as well as type of
company. As reported at the end of March 2013 rental rates were SAR ~ for Grade B offices and
SAR ~ in Grade A office buildings. Rental rate at the end of 2016 was estimated at the average
value of SAR ~. Rentals were lowest in Ayesha bint Abu Bakkar road and maximum on Northern
ring road.
Riyadh Office real Estate Market Segmentation by Location
Central Business District was the key offices real estate market in Riyadh accounting for ~% (~
Sqm) of the net GLA available for leasing and renting in 2016. Occupancy rate was among the