JEDDAH – Jeddah residential market has received a boost from the earlier initiatives of King Abdullah, Custodian of the Two Holy Mosques, providing additional funding for the Kingdom’s affordable housing sector.
Following this announcement, government related entities such as JDRUC and PPA are now planning to deliver more than 30,000 additional residential units across Jeddah over the next few years, Jones Lang LaSalle said in its latest “Jeddah Real Estate Market Overview - Q3” released Sunday.
There is also strong continued interest in the luxury segment of Jeddah’s residential market, particularly along the city’s Corniche area. This trend is further illustrated by the announcement of the Al Jawarah and Kingdom Tower projects. Due to be delivered in 2013 and 2016 respectively, these two projects will provide the first branded residences for sale in the Jeddah market, the study noted.
Office rents in Jeddah were forecast to slowdown in 2012 once additional supply is released to the market.
The expected CBD supply pipeline will provide approximately 60,000 sq m GLA of additional space to the current stock of 445,000 sq m by the end of 2012. As a consequence, the office market is expected to remain tenant favorable during the next two years, the report added.
“Competition will concentrate on quality office space and landlords of older and secondary buildings will be required to develop their offerings by improving workplaces, enhancing security and increasing parking provision to attract occupiers.”
However, Jeddah’s retail centers will continue to benefit from high occupancy rates and the majority of the new supply has already been preleased, Jones Lang LaSalle said.
Retail sales have increased by more than 30 percent during the last eight months which demonstrates strong consumer spending, it said. The hotel market in Jeddah witnessed a marked improvement in occupancies with rates increasing 5 percent year-on-year in the first three quarters of 2011. Growth in business travel is expected to fuel hotel demand in the city, it added. “A strong Ramadan Umrah season over the summer reinforced Jeddah’s hospitality sector performance and the city looks well positioned to benefit from increasing domestic tourism over the long term.”
Craig Plumb, head of research at JLL MENA, said: “The SR500 million economic stimulus package announced earlier in 2011 has sustained the Jeddah real estate market during the year.”
“With Saudi’s oil output having been boosted to offset lower supply from other MENA producers and oil prices remaining relatively stable over recent months, there is likely to be increased investment in the infrastructure and real estate sectors of the economy over the next 12 months.”
“The residential sector is likely to remain the ‘hot spot’ during 2012, with further opportunities to create more affordable housing products. Moreover, continued growth in real estate financing and private sector lending will give a further boost to the overall real estate industry,” Plumb added.
Soraka Al-Khatib, co-head of JLL Saudi Arabia, said “the Jeddah market has seen a continued increase in land sales during 2011 as trading volumes and sale prices have picked up further during the last quarter.”
“There is strong interest from developers to deliver additional residential supply to meet the city’s growing requirements. Rental levels have also increased with a 14 percent growth in average rents being recorded over the year to date.” There is also strong continued interest in the luxury segment of Jeddah’s residential market, particularly along the city’s Corniche area.
“This trend is further illustrated by the announcement of the Al Jawarah and Kingdom Tower projects. Due to be delivered in 2013 and 2016 respectively, these two projects will provide the first branded residences for sale in the Jeddah market,” said Al Khatib.
“The strength of the Jeddah residential market is confirmed by the fact that most of the 16,000 units coming to the market over the remainder of 2011 have already been sold.”
“The limited future supply pipeline and the city’s growing population is expected to drive prices and sustain demand throughout the remainder of 2011 and into 2012. Major investment in infrastructure, transport, health and education sectors will further reinforce Jeddah’s market position,” he added. – SG/QJM