Program HQ driving demand for prime office space in Riyadh
CONSTRUCTION NEWS
The total amount of Grade A office space in Riyadh is expected to grow by 1 million sq m to hit 6.3 million sq m by the end of 2026 ion sq m, thanks to the ‘Program HQ’ which is contributing to increased demand for office space in the Saudi capital, further influencing office lease rates, according to global property consultancy, Knight Frank.
Indeed, 517 companies have now committed to establishing their regional headquarters in the Kingdom, well ahead of the 2030 target of 480, stated Knight Frank in its Autumn 2024 Saudi Arabia Commercial Market Review.
As a result, Riyadh has recorded the highest national increase in Grade A office lease rates over the last 12 months at 31% to around SAR 2,604 per square metre, followed by 2.9% in Jeddah and by 2.2% in the Dammam Metropolitan Area (DMA), it added.
Faisal Durrani, Partner – Head of Research, Mena, explained: "Vision 2030 is reshaping Saudi Arabia’s economy and society, with a central focus on transforming Riyadh into a key regional and global centre for business, finance, leisure, and tourism."
"Indeed, 49% of the new jobs created in the Kingdom over the last five years has been in Riyadh, which is adding to the upward pressure on office rents, with many key office districts and business parks fully leased, with waiting lists," he stated.
"The limited availability of office space is also forcing up Riyadh's Grade B rents, which have climbed by 27% over the past year. Similarly, in the DMA region, Grade A rents have climbed by 2.2% since Q3 2023, fuelled mainly by strong demand from the public sector," he added.
Knight Frank’s analysis shows that Jeddah’s office market saw steady growth over the 12 months leading up to the end of Q3 2024, driven by rising office demand.
This demand has impacted rents, with Grade A office rents increasing by 2.9% to SAR 1,235 per square metre, while Grade B rents rose even faster, up by 3.8% to SAR 810 per square metre from Q3 2023 to Q3 2024.
Occupancy in Grade A offices decreased slightly by 1 percentage point over this period, reaching 94%. In contrast, occupancy for Grade B spaces grew by 2 percentage points, reaching 90%, it stated.
Data centre infrastructure
Over the past two decades, Saudi Arabia has recorded robust growth in the development of its data centre infrastructure, driven largely by the government’s Vision 2030 initiative, which aims to diversify the national economy.
Aggregate supply volumes in Riyadh are presently 263.61MW, while in Jeddah they are tracked at 121.48MW. Dammam, the largest market in the Kingdom, operates an aggregate supply capacity of 392.38MW.
Stephen Beard, Partner – Global Head of Data Centres, said: "Saudi Arabia’s data centre market holds strong investment potential, driven by supply-demand gaps and government-backed digital initiatives. Strategic incentives through Vision 2030, Special Economic Zones, and favourable regulations like the Personal Data Protection Law position Saudi Arabia as a prime market for scalable data infrastructure"
"High-growth cities like Riyadh, Dammam, and Jeddah offer significant opportunities aligned with current and future demand," he stated.
Beard pointed out that investors were being encouraged to focus on deploying hyperscale-ready, energy-efficient facilities that can serve the needs of cloud providers and AI-driven applications.
"Strategic partnerships with local stakeholders will be essential for navigating regulatory frameworks and optimizing the benefits of government incentives. Emphasising sustainable and resilient infrastructure investments aligned with local data policies will ensure long-term value capture in this expanding market," he added.-TradeArabia News Service
