According to a survey released on Wednesday, the office market in Riyadh is expanding rapidly due to increased demand and a notable increase in rental prices.
According to Savills’ Q3 2024 Riyadh Office Market study, the city’s deliberate attempts to diversify its economy, particularly through the growth of the non-oil sector, have made Riyadh a major commercial hub that draws a constant stream of foreign corporations.
With Grade A premises exceeding 98%, the city’s office market saw remarkable occupancy rates, indicating a strong demand for prime office properties. The average rental price of Grade A office space has increased significantly over the past year, with hikes of up to 19% in certain major districts. This consistent increase highlights Riyadh’s appeal in several important industries, such as technology, media, and telecommunications (TMT), which accounted for 40% of leasing activity. The consulting and fast-moving consumer goods (FMCG) sectors came in second and third, at 20% for each.
“The evolution of Riyadh’s office market is a clear indicator of the city’s pivotal role in advancing Vision 2030,” said Amjad Saif, head of transactional services at Savills Middle East. “We’re seeing a diverse range of sectors drawn to Riyadh’s business environment, with heightened demand for high-quality office spaces. This increased activity reflects the city’s position as a strategic gateway for companies aiming to establish a long-term foothold in the Middle East.”
Riyadh is even more alluring to international businesses thanks to incentives from Saudi Arabia’s Regional Headquarters (RHQ) scheme, which include tax breaks, Saudisation exemptions, and expedited visa processing. It is anticipated that the forthcoming 2025 investment system update will strengthen investor rights and relax regulatory constraints, hence enhancing the kingdom’s attractiveness to businesses.
Savills reported a notable increase in inquiries for flexible workplaces due to the increased demand, with office spaces under 250 square meters accounting for 48% of queries. This development is in line with hybrid working patterns and reflects businesses’ desires for flexible work conditions.
“Riyadh’s office market is quickly emerging as a regional powerhouse for business growth, supported by rising demand for premium office spaces and a robust economic outlook,” added Ramzi Darwish, Head of KSA at Savills Middle East. “The combination of high occupancy rates and escalating rental values demonstrates Riyadh’s appeal to both regional and international companies, especially those looking to capitalise on the Kingdom’s pro-business environment and regulatory advancements.”
By 2028, Riyadh plans to create more than 1.6 million square meters of Grade A office space to meet the increased demand. The city’s office environment is anticipated to change due to significant developments like Diriyah Gate and Prince Mohammed Bin Salman Nonprofit City. Tenants will have more options in the upcoming years and rental increases will probably be moderated by the extension of these zones.
A strong 5% rise in non-oil activity and steady inflation at 1.7% are expected to sustain Riyadh’s 1.4% GDP growth in 2024. Strong investor confidence was demonstrated by the significant quarterly growth of 23.4% in Q2 2024 in foreign direct investment (FDI) in Saudi Arabia, which came to SR11.7 billion. In addition, more than 120 international businesses have relocated their regional headquarters to Riyadh this year, including well-known firms like Frost & Sullivan and Goldman Sachs. This pattern emphasizes Riyadh’s allure as a top regional center for global trade.