Saudi Arabia’s Commercial Property Sector Strong But Market Believed By Some To Have Reached Peak

The latest RICS Global Commercial Property Monitor reveals that Saudi Arabia’s commercial property sector cooled this quarter while remaining firmly positive in outlook. Overall occupier demand recorded a +20% reading this quarter, down from +53% previously. This weakened occupier demand was experienced across retail, office and industrial properties. Results for domestic and foreign investment dropped a touch, but all continued to post growth figures, alongside an increasing perception that the market has reached its activity peak.

Commercial office space continues to lead the way in occupier demand, recording a +35% reading, while Industrial and Retail stands at +19% and +6%, respectively. Crucially, all key metrics continue to report positive figures, with rent expectations, capital value and enquiries firmly positive throughout the sector.

One of the key differences on previous quarters is a shift in perception on where the market currently stands in the cycle. This quarter, the largest proportion of respondents (29%) believe the market reached its peak, followed by 24% who are of the view that the market is still in the middle of an upturn.

All things considered, while cooler, Saudi Arabia’s commercial property market remains in firmly positive territory, and continued large-scale investment by the kingdom will likely keep the market in a positive phase for the foreseeable future. Those who believe the market is still in an upturn phase described it as “hot”, so resilience against any potential downturn is reassuringly firm.

RICS Senior Public Affairs Officer, Abdullah Akaish, said:

“The RICS Saudi Arabia Commercial Monitor for Q2 2024 indicates that while the commercial property sector has cooled, it remains in a strong growth phase. Occupier demand has softened to +20% from +53%, reflecting a broader sentiment that the market may have peaked. Despite this, the outlook remains positive across retail, office, and industrial properties, with office space leading in demand at +35%.

“Respondents’ perception indicates a market peak, yet ongoing large-scale investments by the kingdom suggest continued resilience and positive performance in the foreseeable future. The national impact of this trend underscores the importance of continued strategic investments in commercial real estate to sustain economic growth. Future trends suggest that while market sentiment may be cooling, the foundational strength of the sector, bolstered by governmental initiatives, will likely maintain its positive trajectory.”