Knight Frank: Real estate and infrastructure projects in Saudi Arabia cross $1.25tn

Knight Frank’s report analyses the value of real estate and infrastructure projects across Saudi Arabia’s mega and giga projects

Since the inception of Saudi Arabia’s National Transformation Plan in 2016, real estate and infrastructure projects yet to be completed have surpassed a whopping $1.25 trillion (SAR4.7 trillion) in value. Meanwhile, projects already underway are valued at $250 billion (SAR938 billion), as revealed in Knight Frank’s latest Saudi Giga Projects Report.

Faisal Durrani, Partner – Head of Research, Middle East & North Africa, said: “Arguably one of, if not the most expansive real estate development programs ever seen in the world is gathering pace in Saudi Arabia as the 2030 deadline nears to realise Vision 2030.”

The volume of residential units planned has risen to 660,000 units, up 30% in the last 12 months, which will come as welcome news to house hunters prevented by the recent spike in values, which has underpinned a nation-wide decline in the volume of homes being sold. That being said, affordability is still a key hurdle for many buyers and so price points for the new inventory will be critical to reigniting domestic demand.

Knight Frank: Real estate and infrastructure projects in Saudi Arabia cross $1.25tn

Durrani notes that the office pipeline remains stable at 6 million sq m, a figure influenced by the 300,000 square meters of office projects finalized since the previous Autumn. He also highlights the growing office pipeline against the backdrop of a pronounced deficit of prime Grade A spaces in cities like Riyadh. This shortage sharply contrasts with several global hubs where occupancy rates have yet to recover to pre-pandemic figures.

In other commercial sectors, Durrani points out plans for 5.3 million sq m of retail space and an addition of 289,000 hotel rooms. These initiatives align with Saudi Arabia’s aspiration to attract 100 million visitors by 2030, a substantial rise from the 17 million last year, positioning the Kingdom as the 14th most frequented nation globally.

Saudi Arabia’s western provinces see $687 billion of real estate projects to be delivered by 2030

Knight Frank’s report analyses the value of real estate and infrastructure projects across the western half of the country, Riyadh and the remaining provinces. Western Saudi Arabia remains a central piece in the transformative vision for the Kingdom, with $687 billion (SAR2.6 trillion) of real estate projects expected to be delivered by the end of the decade.

Knight Frank: Real estate and infrastructure projects in Saudi Arabia cross $1.25tn

Harmen de Jong, Partner – Head of Strategy & Consultancy, Saudi Arabia, said: “The western half of the Kingdom contains the highest concentration of headline-grabbing projects in the country, including of course NEOM, the $500 billion (SAR1.9 trillion) supercity. Over the course of the last year, various subcomponents in NEOM have been revealed, including Trojena, host location for the 2030 Asian Games and Sindalah, the luxury island and hospitality destination in the Red Sea, which will be the first of NEOM’s projects to materialise. NEOM overall is also progressing rapidly, with $70 billion (SAR263 billion) of projects now awarded, 45% of which has been completed.”

“The challenge for the nation’s giga project developers will be to cater to and appeal to domestic buyers, two-thirds of whom we know through our 2023 Saudi Report to have home budgets of under $400 thousand (SAR1.5 million). With most giga projects expected to launch residential product at over $1 million, bridging this gap between demand and expectations will undoubtedly emerge as a key consideration going forward,” he added.

Riyadh

Knight Frank delves into Riyadh’s resurgence and evolution as Saudi Arabia’s primary commercial and financial centre. The Saudi Arabian capital stands as a central pillar for the nation’s transformation, contributing to 18% of all ongoing real estate and development projects, valued at approximately $229 billion (SAR859 billion).

Ambitions for the city encompass constructing over 241,000 homes by 2030 and introducing 3.6 million sq m of office space. This addition of office space is a boon for tenants grappling with a significant supply deficit, which has propelled Grade A occupancy rates to an average of 98%.

Durrani said: “Riyadh is a hive of construction activity as the city races to keep pace with demand in all real estate segments, while also balancing its vision to emerge as a key global financial and commercial capital. While the $229 billion (SAR859 billion) development pipeline is itself significant, this is around a quarter of the planned $1 trillion total spend to transform the capital. Of note is Riyadh’s ambition to secure hosting rights for the 2030 World Expo, which could further catalyse the pace of transformation and help to crystalise the city’s grand vision.

“Notably, as Riyadh grapples with a shortage of office space, exacerbated by the flurry of international businesses moving in to help deliver Vision 2030 in addition to many working to secure space ahead of the January 2024 deadline set out in the ‘Program HQ’ initiative, 3.6 million sq m of office space is now planned, which should help to alleviate the current dearth of prime space, but it will likely drive a reversal in the current growth in Grade A and Grade B rents, with the latter likely to stagnate, or weaken in the wake of new supply entering the market given occupier focus on best-in-class space.”

Knight Frank also highlights King Salman Park as being one of the most advanced gigaprojects in the city, with $8.8 billion (SAR33 billion) of contracts awarded in the $9 billion (SAR34 billion) development as it moves closer to completion in 2027, complete with over 12,000 homes, more than 600,000 sq m of office space and over half a million sq m of retail offerings.

Knight Frank: Real estate and infrastructure projects in Saudi Arabia cross $1.25tn

World-class Urban Environments

Away from the headline-grabbing gigaprojects around the kingdom, there is a growing emphasis being placed on the well-being of Saudi Arabia’s residents through the improvement and provision of world-class urban environments, says Knight Frank.

This includes Qiddiya’s recent plans to expand to Jeddah with the $266 million (SAR998 million) Qiddiya Coast theme park, in addition to the $500 million (SAR1.9 billion) Riyadh Sports Boulevard as well as the $23 billion (SAR86 billion) ‘Green Riyadh’ which will transform the Saudi Arabian capital into a verdant metropolis through the planting of 7.5 million trees.

Elsewhere, Dammam’s 650,000 sq m Amanat Al Sharqiya project will see the revitalisation of the city’s corniche.

Shehzad Jamal, Partner – Strategy and Consultancy, Middle East & Africa, explained: “The emphasis on wellbeing extends to the 24,000 hospital beds planned, which is set to cost $39.5 billion (SAR148 billion), $27 billion (SAR101 billion) of which is planned for Riyadh Province alone. Furthermore, 60 new educational institutions are being built at a cost of nearly $6.3 billion (SAR24 billion). Undoubtedly this focus on improving the liveability of cities across the Kingdom will contribute not only to improving the lives of citizens and residents, but also positively influence the country’s attractiveness to international talent and their families.”

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