Saudi Arabia's office and hospitality sectors are enjoying record double-digit growth as international interest rises, with Riyadh office rents surging by 23% year-on-year to reach an all-time high of SAR2,700 ($719) per square meter as of the end of March, said global property consultancy Knight Frank.

 

The record headline rent for grade-A offices in the capital reflects high occupancy levels of 98%, with grade-B buildings not far behind at 97%. 

 

This growth has been attributed to the success of government-led initiatives such as the Regional Headquarters Programme, according to the latest Saudi Arabia Commercial Market Overview published by Knight Frank.

 

Grade-B rents also increased by 24% over the same period, as businesses seek alternatives amid limited prime space. However, Knight Frank said some relief is expected over the next two years, with 2.7 million sqm of new office space due to be completed.

 

The report noted that, as of February 2025, around 600 companies have announced plans to establish their regional headquarters in the capital, significantly boosting demand for prime office space.

 

Faisal Durrani, Partner – Head of Research Mena, said: "Saudi Arabia’s economic momentum continued to strengthen across key sectors in 2024, underpinned by rising private sector activity."

 

"A total of 14,303 foreign business investment licences were issued during 2024, a 67% increase from 2023, marking the highest annual figure on record and underscoring the sustained appeal of Saudi Arabia to global corporates and investors," he added.

 

This growth has been fuelled by a wide range of government initiatives, including the Regional Headquarters Programme, tax and regulatory incentives, such as a 30-year tax relief package offering a 0% corporate income tax and 0% withholding tax on approved RHQ activities. Other influential initiatives include the establishment of Special Economic Zones and the Investor Visa Programme.

 

While Riyadh stands at the centre of this transformation, Jeddah too is experiencing a steady increase in office rents, supported by growing demand and investment from major private sector players such as Emaar and Al Nahla Group.

 

Occupancy across both grade-A and grade-B offices has risen to 95% over the past 12 months, with grade-A rents up 4% to an average of SAR1,280 psm, and grade-B rents up 6% to SAR 845 psm. Jeddah’s total office stock is forecast to reach 1.8 million sqm by 2027, up from 1.6 million sqm today, said the report.

 

James Hodgetts, Partner – Occupier Strategy & Solutions, said: "As more companies expand their footprint across Saudi Arabia, Jeddah is attracting a growing number of regional and local firms. This rising interest is being supported by a healthy office development pipeline."

 

"Upcoming projects include Jeddah Gate, which is expected to deliver 230,000 sqm between 2025 and 2028, and Jeddah Rose, a mixed-use development bringing 25,000 sqm of office space to the market by the end of 2025," he added.-TradeArabia News Service