Embed Size (px)
Citation preview
Riyadh Real Estate Market Overview
Q1 2014
2
Macroeconomic overview
Indicator 2013 2014 (f) 2015 (f)
Saudi Arabia
Population (millions) 29.9 30.7 31.5
Real GDP Growth (Y-o-Y) 3.8% 4.4% 4.3%
Inflation (% Change) 3.5% 3.7% 3.5%
Budget Surplus (USD billions) 54.9 37.9 43.0
Riyadh
Population (millions) 5.8 5.9 6.2
Cost of Living Index (% change) 3.8% 3.6% 3.7%
Sources: Sama, Jadwa, Oxford Economics
f:forecast
3
Economic highlights – Q1 2014
Real GDP in KSA grew by 4.7% in Q4 2013, with year on year growth for 2014 forecast to be around 4.4%. High oil production and expansionary fiscal policy have kept the Kingdom’s growth at a high level.
Retail sales continued to increase, growing by 11.3% in Q1 2014 compared to the same quarter last year.
Bank lending to building and construction has increased by 13.9% in Q1 2014 from the same period last year. This reflects greater participation in infrastructure and housing projects.
The Ministry of Housing has signed contracts worth USD 1bn (SAR 4 bn) to develop around 40,000 residential units on 26 million sqm of land in eight developments across the Kingdom.
Saudi CPI inflation fell to a four year low of 2.8 percent year-on year in February compared with 2.9 percent in January. The core inflation also fell to below 1.5 percent for the first time since April 2011.
Saudi banks increased their lending to real estate end users (mostly mortgages) by 26% in Q4 2013, to the highest level recorded during the last five years.
4
Talking points – Q1 2014
• The Arriyadh Development Authority (ADA) has released plans to
transform the downtown area of Riyadh into an historical, administrative,
economic and cultural centre.
• Saudi Hotel and Resorts Company (Sharaco) has awarded a contract to
Perkins and Hill, a US based architecture, firm to design a five star hotel
in the Diplomatic Quarter of Riyadh.
• A private healthcare group is planning to build a USD 186.6mn
(SAR 700mn) medical city in Riyadh.
• A new cement company is to be set up in Riyadh to increase capacity for
construction materials following the announcement of a wave of new
projects across the Kingdom. The new company will have a share capital
of USD 213mn (SR800mn) , with the founding investors holding a 50%
interest.
• Around 30% (92 units) of Maskan Arabia Real Estate Development’s
292-unit housing project (Maskan) will be completed by Q3 2014, with
the remaining units expected to be handed over in Q1 2015.
• Hill International has been awarded a US$6.6mn one-year contract
extension from the Public Pension Agency of Saudi Arabia to continue
providing project management services in connection with development
of the USD 7.8bn King Abdullah Financial District in Riyadh.
• Bechtel is currently working on an eight month design period as part of the
USD 22.5bn six-line Riyadh Metro network. The project was announced in
July 2013 with Bechtel starting work in November.
• Pre sales in the Illoura Villas Project (on Malaga North of Riyadh) were
commenced in the first quarter of 2014. The project consists of 138 villas
worth over SAR 300mn to be constructed over two phases.
• According to data from the Ministry of Justice, Riyadh was the most active
Saudi market in 2013 in terms of real estate transactions. Transactions
with a total value of SAR 99bn (USD 26.5bn) were completed in 2013,
exceeding the SAR 87bn (USD 23.2bn) transacted in 2012.
• More than 43,400 real estate transactions were recorded in Riyadh. While
the majority of these were in the residential sector, contributing more than
SAR 51bn (USD 13.6bn), there were a number of large commercial
transactions concluded, with a total value of SAR 47bn (USD 12.5bn).
• The Saudi Commission for Tourism and Antiquities (SCTA) has
announced plans to expand the hospitality sector, with a further 35,000
hotel rooms planned across the Kingdom over the next 5 years. As part of
this growth, Alesayi Group have announced a JV with Accor to develop 10
new hotels, including an additional 195 room Ibis property in Riyadh.
The Saudi Arabian Monetary Agency (SAMA) has issued licences to allow leading banks to offer real estate financing. Licences have been issued to
SAMBA, National Commercial Bank, Banque Saudi Fransi, Bank Albilad and Al Rajhi Bank, with other licence applications pending. This follows the
approval of the long awaited Mortgage Law last year and should facilitate improved access to home ownership in the Kingdom.
5
Riyadh metro map
Source: ArRiyadh Development Authority
Riyadh metro map
Line (4) Orange Line
Madina Al Munawra – Amir Saad
bin Abdul Rahman Al Awal Road
Line (5) Yellow Line
Airport Road
Line (6) Purple Line
Abdul Rahman bin Ouf – Shaikh
Hassan bin Hussain bin Ali
Line (1) Blue Line
Olaya – Batha – Al Hayer Road
Line (2) Green Line
King Abdul Aziz Road
Line (3) Red Line
King Abdullah Road
Princess Nora University
King Abdullah Financial District
King Khaled International Airport
N S
E
W
6
Riyadh prime rental clock
*Hotel clock reflects the movement of RevPAR.
Note: The property clock illustrates where JLL estimate each prime market is within its individual rental cycle as at end of relevant quarter.
Source: JLL
Rental Growth
Slowing
Rents
Falling
Rental Growth
Accelerating
Rents
Bottoming Out
Retail
Office
Residential
Hotel*
Q1 2014
Rental Growth
Slowing
Rents
Falling
Rental Growth
Accelerating
Rents
Bottoming Out
Retail
Office
Residential
Hotel*
Q1 2013
Riyadh office market overview
8
1,887 2,059 2,160
2,802 3,375
642
573 326
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2012 2013 2014 2015 2016
Tot
al S
tock
(sq
m G
LA in
000
's)
Riyadh Office Supply (2012 – 2016)
Completed Stock Future Supply
Office supply and demand
• An additional 101,000 sq m of office space was completed in Riyadh over
the last six months, bringing the total office stock to around 2,160,000 sq m.
• The largest recent completion was Olaya Towers, which introduced
approximately 98,000 sq m of office space into the market. Other significant
completions included C3 Tower on King Faisal Street and Al Sahafah
Building in Sahafah.
• Apart from the GOSI owned Olaya Towers (Grade A), all other completions
over the last six months have been of Grade B quality.
• An estimated 642,000 sq m of office space is expected to be completed
over the next three quarters, which will increase office stock substantially
and result in more vacant space in lower grade buildings.
• The first phases of both ITCC and KAFD are now due to complete during
2014, with ITCC adding 160,000 sq m and KAFD 558,000 sq m over the
course of the year.
• Office vacancies in Grade A buildings are likely to remain relatively low as
demand for quality space is still strong. The East Tower of Olaya Towers
has been fully leased while the West Tower has leased approximately 70%
of its office space.
• The 50 floor Majdoul Tower on King Fahd Road is the largest single office
tower currently under construction in Riyadh and is expected to deliver
around 70,000 sq m of space in 2017.
Source: JLL, Q1 2014
9
Major Existing & Future Office Projects Major existing & future offices projects
2 3
1
2
1 Al Faisaliyah Center
2 Kingdom Center
3 Tatweer Tower
1 KAFD
2 ITCC
Existing
Future
3
4
4 Tamkeen Tower
5
5 Granada Business Park
6
6 The Business Gate
4
3 MIG Tower
7 Olaya Towers
4 Majdoul Tower
7 1
10
Office rental performance
• The average quoted rents for completed Grade A & B buildings have
decreased marginally (by less than 1%) to SAR 1,056 per sq m p.a. at
the end of Q1 2014.
• Average quoted rents fell marginally for both Grade A and Grade B
buildings, to SAR 1,254 and SAR 873 respectively.
• Asking rents for Prime office space have remained unchanged at SAR
1,800 sq m pa, approximately 70% higher than the average for Grade
A and B.
• Vacancies in prime buildings remain minimal (below 5%).
• Vacancy rates across the whole market (prime, grade A and grade B)
have remained stable at around 19% over the past 6 months.
• The substantial increases in supply expected during 2014 are likely to
increase vacancies and subsequently decrease rents (for Grade B
properties in particular) as competition increases and tenants choose
to upgrade to better quality space.
Source: JLL Q1 2014
0
200
400
600
800
1,000
1,200
1,400
Average Grade A Average Grade B Average (completedGrade A and Grade B
buildings)
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
Average Rents (Q1 2013 – Q1 2014)
SA
R p
er s
q m
p.a
.
11
Office market summary
Indicator Level Comment /Outlook
Current Office Stock 2.2 million sq m
The completion of Olaya towers has added a substantial amount of
office space, increasing competition and moving market conditions
in favour of tenants.
Future Supply (2014 – 2016) 1.5 million sq m
A substantial amount of office space is expected to enter the market
with the completion of the first phases of ITCC and KAFD later in
2014.
City-wide Vacancy
CBD Vacancy
19%
19%
Average – Grade A Rental
Average – Grade B Rental
SAR 1,254 per sq m p.a.
SAR 873 per sq m p.a.
Riyadh residential market overview
13
Residential supply and demand
• Approximately 11,000 residential units were completed over the past
6 months, bringing the total existing stock to approximately 944,000
units. A further 19,000 units are expected to be completed over the
course of 2014.
• 74,000 residential units are expected to enter the market by the end
of 2016, which should relieve some of the current housing shortage.
• As neighbourhoods within the existing urban framework of Riyadh
become more saturated, there is a noticeable movement of
development of the city to the North.
• A number of residential compounds are currently under construction.
Most of which are located to the North of Riyadh. Notable projects
include Al Bustan Village (838 residential units), which is adjacent to
the American International School.
• Arizona Golf Resort and Fal Compound in North East Riyadh are
both building extensions as a result of the high demand for residential
compound units in Riyadh.
• The recent launch of Masharef Hills Phase 1 (178 units) has received
a positive response, with the majority of units being sold.
Source: JLL, Q1 2014
909 936 944
956
993
19
37
37
840
860
880
900
920
940
960
980
1,000
1,020
1,040
2012 2013 2014 2015 2016
Tot
al S
tock
(N
umbe
r of
uni
ts in
000
's)
Riyadh Residential Supply (2012 – 2016)
Completed Stock Future Supply
14
Major existing & future residential projects
1 Al Qasr Project
2 Balencya Project
3 Al Argan Project
1 Al Rabiah Project
2 Al Shams Arriyadh Project
3 Al Ghroub Project
4 Maskan Arabiah
4 Rafal Tower Project
1
1
2
3
2
3
4
4
Existing
Future
5 Masharef Hills
6 Durrat Al Riyadh
5
6
5 Manazil Qurdobah 2
6 Al Reem Residences
5
6
15
Residential prices
Source: JLL, Q1 2014
SA
R p
er s
q m
• Average villa prices have continued to increase, reaching SAR 4,383
per sq m, which is a marginal increase of 2.5% in Q1 2014.
• After declining during 2013, average villa prices in the center of Riyadh
recorded an increase (to SAR 4,585) in Q1 2014.
• Villa prices in North Riyadh have seen the highest increase (of
approximately 20%) over the last six months, to SAR 5,118 per sq m.
• North Riyadh has become popular for residential development as other
parts of the city have become saturated, with a notable movement of
residential developments, compounds and international schools in that
direction.
• Apartment prices have begun to show signs of improvement, with a
9.3% improvement in the average price recorded over the past 6
months (reaching SAR 2,770). This is however still lower than the
same period last year.
• The increase in average apartment prices is partly a reflection of the
completion of a number of high end apartment projects, such as Phase
2 of Manazel Al-Qurtaba and some stand alone developments in the
East of Riyadh.
• The Eastern residential neighborhoods of Riyadh have seen the
highest increase in apartment prices, which have increased by 19%
over the last six months (to SAR 3,320), as most of the completions in
this area have been high quality residential apartments.
SA
R p
er s
q m
Source: JLL, Q1 2014
0
1,000
2,000
3,000
4,000
5,000
6,000
North South East West Center
Villa - Average Price/sq m
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
0
500
1,000
1,500
2,000
2,500
3,000
3,500
South East West
Apartment - Average Price/sq m
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
16
Residential rentals
• Average rentals for a 4 bedroom villa have increased marginally
since Q3 2013 (by less than 1%) to SAR 121,700 per annum.
• The highest increase in villa rental prices was in the North of Riyadh,
which increased by 5% to SAR 110,000 p.a. This is a result of high
demand for villas from local families as Government bodies and
schools move in that direction.
• Villa rents in the East and Centre of Riyadh have remained largely
stable over the last six months. While villa rents in the South have
decreased marginally (by 2.6%) to SAR 74,500 p.a.
• Rents for villas in expatriate compounds continue to increase and are
likely to remain high, even as new supply enters this market over the
next couple of years.
Source: JLL, Q1 2014
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
North South East West Center
Villa - Average Annual Rent
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
SA
R p
er s
q m
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
North South East West Center
Apartment - Average Annual Rent
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
SA
R p
er a
nnum
Source: JLL, Q1 2014
• Average apartment rents have continued to steadily increase, rising by
2.2% in Q1 2014, to reach an average of SAR 32,900 p.a. for a 2
bedroom apartment.
• Apartment rents have increased across all areas in Riyadh, however,
most increases have been marginal. The highest increase (5.2%) has
been in South Riyadh, to an average of SAR 26,800 p.a., followed by
the Centre of Riyadh, which increased by 2.1% to an average of SAR
39,700 p.a.
• Due to the saturation of Riyadh’s central neighborhoods, districts like Al
Yasmeen, Al Malaqa, Al Amanah and Al Aziziah in the North and South
of Riyadh are experiencing higher rates of rental growth.
17
Residential market summary
Indicator Level Comment /Outlook
Current Residential Stock 944,000 units Majority of housing projects are moving towards the north of Riyadh as
central neighbourhoods have become largely saturated.
Future Supply (2014 – 2016F) 93,000 additional residential
units Future developments are concentrated to the North and South of Riyadh.
Average 2 Bed Apartment Rent SAR 32,900 p.a. Apartment rents in the South of Riyadh have seen the
highest increase in rents over the last six months.
Average 2 Bed
Apartment Sale Price SAR 2,700 per sq m
Apartment prices have begun to increase as a result of
the completion of high end units. Especially in the East
of Riyadh.
Average 4 Bed Villa Rent SAR 121,700 p.a.
Villa rents have increased the highest in North Riyadh
following the movement of Government bodies in that
direction.
Average 3 Bed Villa Sale Price SAR 4,383 per sq m
Villa prices have increased as expected. Especially in
the North part of Riyadh which is seeing increased
demand.
Riyadh retail market overview
19
Retail supply and demand
• There have been no retail completions in Riyadh over the last six
months, with the supply in major malls therefore remaining unchanged
at 1.28 million sq m.
• KAFD and ITCC are both expected to complete community retail
space during 2014, with ITCC adding 50,000 sq m and Phase 1 of
KAFD adding 88,000 sq m.
• A total of 245,000 sq m of additional retail space is expected to enter
the market by the end of 2014, increasing supply by 19% to 1.5 million
sq m.
• Notable projects include Nakheel Mall by Fawaz Al-Hokair (66,000 sq
m of GLA) and the Family Garden (20,00 sq m of GLA).
• A further 254,000 sq m is expected to open over 2015 – 2016
increasing total mall based retail supply in Riyadh to 1,778,000 sq m
by the end of 2016. Among the major completions over this period is
Hamat Property’s Alia Center, which is expected to deliver 45,000
sq m to the market.
Source: JLL, Q1 2014
1,214 1,279 1,279 1,524
1,691
245
167 87
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2012 2013 2014 2015 2016
Tot
al S
tock
('0
00 s
q m
)
Riyadh Retail Supply (2012 – 2016)
Completed Stock Future Supply
20
Major existing & future retail malls
1 Riyadh Gallery
2 Sahara Mall
3 Hayat Mall
4 Khurais Plaza
5 Al Otheim MAll 2
1
6
4 5
7 8 6 Granada Mall
7 Rimal Center
8 Panorama Mall
Existing
Future
1 KAFD Retail
1
9
9 Al-Qasr Mall
2
2 Nakheel Mall
3 Alia Plaza
3
3
21
Rental performance
• Average retail rents have increased slightly over all classes of retail
space over the last six months from SAR 2,600 in Q3 2013 to SAR
2,700 per sq m in Q1 2014.
• Super regional and regional shopping centres command higher rents
than community centres. However, community centres have seen the
highest increase in rents per sq m over the last six months, increasing
by almost 7%.
• The strong performance of community centres is most likely due to
the limited availability of space in these malls and their relative
affordability.
• Vacancy rates are relatively low across the retail market, remaining
unchanged over the last six months at 12%. Vacancies are
particularly limited in the super regional and regional malls, which
have maintained high occupancies.
• Hamat Property Co. and Tamimi are both expanding their portfolio of
community centres, and are expected to deliver more than 100,000
sq m of community retail space over the next four years.
.
Source: JLL, Q1 2014
0
500
1,000
1,500
2,000
2,500
3,000
Super Regional Regional Community
SA
R /
sq m
Average Retail Rentals (Q1 2013 – Q1 2014)
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
22
Retail sector summary
Indicator Level Comment / Outlook
Current Retail Space* (GLA) 1.28 million sq m There have been no additions to Riyadh’s retail market over the last
six months.
Future Supply (2014 – 2016) 499,000 sq m KAFD, Olaya Towers and ITCC are the next major quality retail
projects expected to be delivered during 2014.
Average Estimated Rental
Value
SAR 2,700
per sq m p.a.
Average rentals have increased marginally across all
retail categories over the last six months, with
community centres experiencing the highest rental
increase.
Average Regional Mall Vacancy 12%
Vacancies have remained stable at 12% over the last
two quarters.
Riyadh hotel market overview
24
Hotel supply
• The total supply of 3, 4 and 5 star hotels in Riyadh stands at
approximately 13,133 rooms at the end of Q1 2014.
• There have been several hotel openings in Riyadh during the last
six months. These include the Narcissus Hotel (which opened
during Q3 2013 adding 280 rooms) and the Kempinski Burj Rafal
(which opened during Q1 2014), the first Kempinski hotel in KSA,
that added 349 rooms to the Riyadh hotel room supply.
• Around 20% of the 155 additional hotel developments planned in
KSA over the next two years will be in Riyadh.
• A significant number of completions are expected for 2014, due to
the postponement of several projects originally scheduled for
2013.
• Notable hotel openings expected in 2014 include the Park Inn by
Radisson (168 rooms) and the Rose Rayhan (236 rooms).
• An additional 4,300 rooms are also expected to be delivered in
2015, assuming there are no further delays, with the Hilton Hotel
and Residence project expected to deliver a substantial 850
rooms.
• Le Méridien Riyadh is expected to open in 2016 offering 230
rooms. This will be the first new hotel in KSA since the brand was
acquired by Starwood in 2005.
Source: JLL, Q1 2014
Note. JLL is now including 3 star hotels in addition to 4 and 5 star hotels in our coverage of
the Riyadh market. This has resulted in a substantial increase in the existing hotel room
supply since our last report.
8,400
12,503 13,133 15,783
20,083 20,783
2,650
4,300 700
0
5,000
10,000
15,000
20,000
25,000
2012 2013 2014 2015F 2016F 2017F
No.
of R
oom
s
Riyadh Hotel Supply 2012 - 2017F
Current Supply Future Supply
25
Hotel performance
• The Riyadh hotel market is showing signs of improved
occupancies as the market absorbs the substantial increase in
supply experienced over the last two years. Improvements in
occupancy levels have however been achieved at the cost of
lower average room rates and RevPAR figures have therefore
declined compared to the same period of 2013.
• Occupancy levels over Q1 2014 have averaged 67%, which
represents a 4% increase compared to the 63% recorded in Q1
2013.
• Average daily rates (ADRs) have fallen as hotels have focussed
on increasing vacancies through greater price discounting.
Average ADRs over the first quarter of 2014 stood at USD 246, a
decline of almost 10% compared to the same period of 2013.
• As a result of the fall in ADRs, RevPAR also reduced over Q1
2014 (to USD 171), a decline of approximately 4% compared to
the same period last year. Source: JLL, Q1 2014
246 292 268 277 271 273 246
81%
74%
69% 70%
64% 63%
67%
30%
40%
50%
60%
70%
80%
90%
100
150
200
250
300
2008 2009 2010 2011 2012 2013 2014
Occ
upan
cy %
AD
R (
in U
SD
)
Yearly ADR Yearly Occupancy Rate
Hotel Performance (2008 – 2014 YT March)
26
Hotel market summary
Indicator Level Comment / Outlook
Current Hotel Supply 13,100 rooms
Includes supply of 3,4 and 5 star rooms. The most notable opening over the
last six months was the Kempinski Burj Rafal in KAFD which increased room
supply by 349 rooms.
Future Supply (2014 – 2017) 8,000 rooms
A considerable number of rooms are expected to enter the market over the
next two years, with this total including a number of projects delayed from
2013.
2014 (YT March) Occupancy 67%
The hotel market in Riyadh has experienced a 4%
increase in average occupancy levels compared to Q1
2013.
2014 (YT March) ADR USD 246
ADR and RevPAR levels have decreased YT March
(compared to 2013 levels), currently standing at USD 246
and USD 165 respectively.
27
Definitions and methodology
Residential: • The supply data is based on the National Housing Census
(2010) and our quarterly survey of major projects and stand
alone developments in selected areas of Riyadh.
• Completed building refers to a building that is handed over for
immediate occupation.
• Residential performance data is based on two separate baskets
one for rentals in villas and apartments and another basket for
sales performance for both villas and apartments in selected
locations across Riyadh.
Retail: • Retail supply data covers the GLA (Gross Leasable Are) within
organized malls over 10,000 sq m.
• Classification of Retail Centres is based upon the ULI definition
as published in Retail Development, 4th Edition published by
ULI.
• Rent represents the average quoted average rent for line stores
in the major shopping malls in Riyadh.
Office:
• The supply data is based on our quarterly survey of the Grade A
and B office space located in CBD, North and East Ring roads,
Khurais, Mazer, and Sitteen Streets.
• Completed building refers to a building that is handed over for
immediate occupation.
• Prime Office Rent represents the top open-market rent that could
be expected for a notional office unit of the highest quality and
specification in the best location in a market, as at the survey
date (normally at the end of each quarter period). The Prime
Rent reflects an occupational lease that is standard for the local
market. It is a face rent that does not reflect the financial impact
of tenant incentives, and excludes service charges and local
taxes.
Hotels:
• Hotel room supply is based on existing supply figures provided
by Saudi Commission for Tourism and Antiques as well as future
hotel development data tracked by Jones Lang LaSalle Hotels.
Room supply includes 3, 4 and 5 star hotel rooms but excludes
serviced apartments.
• Performance data is based on a monthly survey of hotels
conducted by STR Global.
Contacts
@JLLMENA youtube.com/joneslanglasalle linkedin.com/company/jones-lang-lasalle joneslanglasalleblog.com/EMEAResearch
www.jll–mena.com
COPYRIGHT © Jones Lang LaSalle IP, INC. 2014
This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior
written consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is
made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any
liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.
Jamil Ghaznawi
Head
KSA
Craig Plumb
Head of Research
MENA
Andrew Williamson
Head of Retail
MENA
Fayyaz Ahmad
Associate Director, Advisory
KSA
Chiheb Ben Mahmoud
Director, MEA
Hotels & Hospitality Group
Ahmed Almihdar
Analyst
KSA
