Saudi Arabia is looking to expand its commercial offering, reduce its dependence on oil and increase its attractiveness to international investors. It is planning to build 925,000 square meters of office space by 2022. Its Vision 2030 aims to diversify its economy and reduce its reliance on oil. By 2022, it hopes to attract more foreign investment and international trade. But for now, office space in Riyadh is expensive.
Demand
Occupiers are looking for the best office space in the city and rents in the emirate have increased by 6.5 percent in the past year. While rents in Riyadh have grown, Jeddah has also seen a rise in demand for office space. The resurgence of Jeddah is backed by a new real estate project.
Commercial office development in Saudi Arabia is still at a strong stage compared to its regional counterparts. However, the economy is still growing strongly, which is making office developments less attractive. The city’s office supply reached 1.9 million square meters in the third quarter of 2012. The vacancy rate climbed to 17% in the central business district, but this figure still compares favorably to the rest of the region.
Rents
The rental rates in Riyadh are largely dependent on location and amenities. Prime office spaces can command high rents, while smaller buildings with less expensive rentals can be found in the Golden Area. With a large number of small businesses in Saudi Arabia, the availability of office space is quite diverse. This article explores the current rental market in Riyadh based on the location of your company.
Growth
The growth of office stock in Riyadh is expected to continue, with the capital now boasting 4.2 million square meters of available space. New projects and government initiatives are expected to boost the economy, boosting demand for office space. According to CBRE, the number of office square meters is expected to grow by eight percent by 2022, with the growth of new commercial spaces largely attributed to mixed-use development.
The growth of office stock in Riyadh has been largely driven by the oil sector, but this is now changing with the growth of the service industry. Occupiers are still opting for Grade B stock and parking continues to take precedence over quality. In the first quarter of 2014, prime office rents increased by 5% year-on-year, but the growth is likely to slow in the short to medium term.
Other Costs
The demand for office space in Saudi Arabia is expected to grow over the next year, as international firms relocate to the city to tap into the market. Investors should keep in mind that tenants are looking for Grade A offices with flexible working arrangements. The government has also licensed 44 international firms to establish regional headquarters in Riyadh. Moreover, the number of office openings is expected to increase by 8.1% this year.
Those seeking business space in Riyadh should consider renting a furnished and wired office, as these can make the transition to a new office easy and quick. Executive suites can be customized to suit the needs of an organization, and workspace providers provide their clients with an array of customizable features, including the type of decor and furnishings. However, small budgets will have a harder time finding fully furnished office spaces, which will increase their costs. Visit innovation-sa.com for more information on this.
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