Robust economic growth fuels Saudi real estate performance

Zawya

13 hours ago

Saudi Arabia's robust economic growth, driven by a 4.9% expansion in non-oil GDP, is fuelling strong performance across the real estate market, according to CBRE Middle East, a global leader in commercial real estate.
The second quarter witnessed a dynamic and evolving real estate landscape in Saudi Arabia, driven by a combination of policy adjustments and strategic initiatives, stated CBRE in its 'Q2 2025 Saudi Arabia Real Estate Market Review.
Real GDP in Q1 2025 expanded by a robust 3.4%, though the full-year forecast has been adjusted to approximately 3.5% due to a more conservative outlook for the oil sector.
The kingdom remains committed to its Vision 2030 initiatives and fostering sustainable economic growth.
The implementation of the Real Estate Transaction Tax (RETT) and strategic realignments within the construction sector shaped the market dynamics. Moreover, the kingdom's logistical prowess improved, with a rise in the Agility Emerging Markets Logistics Index, stated the CBRE report, which highlights strong growth across key sectors.
The Hail region attracted substantial investment, demonstrating its strategic importance, while several major mixed-use developments, such as Osus Eye in Riyadh, the Pulse Wadi District, and the ongoing advancement of the Dar Al Hijra project in Madinah, underscored the Kingdom's commitment to economic diversification and urban growth.
According to CBRE, the office market in Saudi Arabia thrived in Q2 2025, characterised by key trends. The demand for office space, especially Grade A properties in Riyadh, remains high, leading to rising rental rates and exceptionally high occupancy levels.
The government's Regional Headquarters (RHQ) Program continues to drive demand, attracting international companies.
The rise in the flex sector and the preference for smaller, efficient office spaces are also notable. Although a limited new supply in 2025 is expected to exacerbate the market dynamics, the outlook is positive, with increased supply anticipated in the coming years, along with strong performance in Jeddah.
Looking at the Residential real estate market in Saudi Arabia significant growth and investment were witnessed in Q2 2025, particularly in Riyadh.
Driven by strong demand, transaction volumes were substantial, with land sales leading the way. Government support and initiatives are actively promoting development and attracting both local and international investors.
New project launches, such as Azure's Lamara project and ROSHN Group's ALDANAH community, alongside new investment funds, are fueling the sector's expansion and commitment to addressing the Kingdom's housing goals.
CBRE pointed out that the Q2 2025 saw a dynamic retail sector in Saudi Arabia, marked by the rise of 'Retailtainment' and the expansion of entertainment hubs.
The increasing integration of entertainment into malls and the substantial investments by Saudi Entertainment Ventures (SEVEN) are key drivers of this transformation, it stated.
Despite a slight dip in sales during the Eid holiday, the sector is navigating challenges like oversupply and e-commerce through innovative projects and strategic adaptations. Stable rents and occupancy rates in super-regional malls and the addition of new developments are adding to the evolving retail landscape, it added.
Significant developments in Saudi Arabia's Industrial and Logistics sector supported the country's economic diversification efforts in Q2 2025.
CBRE pointed out that there was robust demand for warehousing despite challenges in finding immediately available, high-quality facilities.
A major investment in a $7 billion cross-country rail corridor will enhance logistics capabilities, it stated.
Average warehouse rents are increasing, reflecting strong demand. The launch of the Advanced Manufacturing and Production Center and collaborations like the one between Saudi Aramco Technologies and BYD are driving industrial transformation and innovation, it added.
Matthew Green, Head of Research Mena, said: "This groundbreaking regulation marks a pivotal moment for Saudi Arabia's real estate market. By welcoming foreign investment, we anticipate a transformative shift, driving substantial growth in inbound capital over the next five years."
"This will not only support the ambitious FDI targets but also stimulate private sector development, further diversify the non-oil economy, and generate wealth for landowners. Furthermore, it will foster long-term population growth and economic stability by enabling foreign residents to participate in homeownership, a significant social milestone," he added.
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