Commercial real estate activity is one of the key tangible barometers to track the health of the economy. A constantly changing landscape, with its cyclical swings, commercial real estate activity is a leading indicator for expected expansionary activities of business entities. Examples of large companies like Apple Inc., buying/leasing commercial space in emerging economies is a sign of the redistribution/expansion of the company’s activities in the future.
Commercial real estate ownership and leasing were previously a mom and pop business before sophisticated/qualified investors started looking at it as a long-term asset class that can provide abnormal/extraordinary returns. Opening up of capital market activity for real estate through investment vehicles, such as REITs, and REOCs in the stock market and innovative products, such as commercial mortgage-backed securities, etc., have been key to the success of the commercial real estate sector. These initiatives have financed commercial real estate construction and management activity to a large extent, over the last 50 years or more.
The market research study on the commercial real estate market in Saudi Arabia focuses on the market activity within the key subsectors, such as offices, retail, industrial and multifamily.
Key cities of Saudi Arabia are covered in the study, based on the population, city level GDP, business and commercial construction activity, demographics and other factors.
Key Factors Affecting the Commercial Real Estate Market:
- Economic Activity/Policy, Exchange Rate, Inflation and Employment Activity
- Industry Sector (that the property is most fit for) and Associated Cyclicality
- Capital Market Access, Liquidity, Interest Rates and Mortgage Rates.
- Demographic and Socioeconomic Trends
- Real Estate Demand, Supply and Pricing
- Regulatory Landscape, Compliance with local government bodies, EHS requirements.
- Insights from Comparison between Services and Non-services Sectors
- Technological Changes, Adaption and Disruption in the Industry
- Time for Completion of a Project (for ongoing projects), and Sales Trend (of ready projects).
- Taxes (related to the real estate business)
- Rent or Buy Dynamics
Economic Activity/Policy, Exchange Rate, Inflation and Employment Activity
A major factor that affects the value of real estate is the health of the economy. Economic indicators, such as the GDP, employment data, manufacturing activity, inflation, exchange rate fluctuations, interest rates, mortgage rates, etc., are the measuring criteria. When the economy is sluggish, it affects the health of the real estate. However, the cyclicality of the economy can have varying effects on different types of real estate. The revenues/returns in the hospitality sector during economic downtime are more vulnerable than that of office space since office spaces are secured through long-term leases and in other cases through outright purchase. Hotel occupancy cycles are very short and, hence, there is significant loss/lack of return on investments made in the hospitality sector real estate, as compared to the office sector real estate.
Economic activity in Saudi Arabia is tracked key cities level and is considered as the cornerstone of the market research study. This establishes the blueprint for determining the way forward, given the current interrelation between macroeconomics and commercial real estate in Saudi Arabia.
Real estate has been, for the most part, one of the most favoured investment options for long-term value retention and its ability to generate returns higher than any other investment classes. Over the past two decades, the development of commercial real estate capital market, in particular- expansion of the markets for equity and debt securities, has transformed the industry. This has provided exceptional capital availability and pricing, reshaping valuation metrics. Thus, heavily influencing the private capital formation and providing investors with a greater selection of investment, hedging and arbitrage opportunities. With shortening business cycles and volatile economic trends, sourcing suitable funds, while ensuring maximum returns, has become a challenging task.
After buyouts, real estate is a sector with the highest private equity funds’ disbursement, annually, for almost the last two decades, as observed through available data.
In the report, the private equity activity, credit availability for commercial real estate, and other instruments, such as commercial mortgage backed securities, are tracked in Saudi Arabia and its key regions/cities.
Asset Class Performance
- Offices - Asset class continues to be a favourite of institutional investors, who continue to expand their sights into the secondary markets. Despite the increase in freelance workers and short-term labour contracts, office-based jobs still account for 39% of the total job growth, globally. As a result, with the expanding economy, and improving employment scenario, the need for office space is expected to increase as well.
- Retail - Online shopping did not kill bricks & mortar retail, rather reoriented it. Retailers and mall operators are adopting new placemaking strategies to compete with e-commerce, which combined with stronger consumers, should fuel more demand for retail space. However, these businesses will now be cautious about location, size and formats of stores, after their learnings from the scare of e-commerce trade. There will be a certain degree of additional friction, and this factor may affect transaction volumes.
- Industrial - Strong demand from e-commerce and third-party logistic firms for distribution and warehouse space — including for smaller in-fill sites within major metros, will continue to reshape the industrial market. Concepts of shared economy and optimal usage of space, driven by the web, data science, and analytics may create an additional layer of supply within the commercial real estate market, worldwide; notwithstanding the pace at which these changes will occur differently within developed and emerging economies.
- Multifamily - The sector continues to profit from fundamental shifts in demographics, home ownership, economic improvement, and current abundant supply of capital. It has become the single most important driver for the growth and improved success of other sectors, such as retail and self-storage.
Technology continues to be an agent of change in all the areas of business and industry; the real estate market is no exception. The remarkable growth in new applications is changing commercial real estate, for the better. Everyone from brokers, property managers to developers and tenants, benefit from the new tools that boost productivity while saving cost.
Some of the technology trends emerging in the commercial real estate market are-
- Cloud Technology - Cloud-based platform aids in collecting leasing data across property portfolios in a single cloud-hosted database. Thus, it functions as a system of record for property managers to manage their workflows and customer relationships.
- Big Data Analytics
- Smart Sensor Technology - Sensor technology is set to become a selling point for commercial properties, aiding in properties to go green, along with enhancing energy savings.
- Cloud-based Mobile Applications, Networking Platforms
- Virtual Reality and 3D Imaging
- Industry Outlook: Key Economic Indicators affecting the performance of the market in Saudi Arabia (GDP, Consumer confidence, interest rates etc.,)
- Regulatory environment in Saudi Arabia and Key Policy Initiatives
- Market Dynamics:
- Drivers: What are the key factors driving growth in the market for commercial real estate in Saudi Arabia?
- Restraints: Which are the most relevant inherent threats/restraints which hinder the growth of commercial real estate market in Saudi Arabia
- Opportunities: Sectors of high return or relatively quicker turn around on investment (both via direct and indirect modes of investment)
- Challenges: Factors affecting the medium-term growth of the market
- Market Concentration: Porter’s 5 Forces Analysis quantified by a comprehensive list of parameters for the commercial real estate market in Saudi Arabia
- Industry Value Chain Analysis
- Market Data Analysis
- By Property Type (Offices, Industrial, Retail and Multifamily)
- By Geography (Key Cities of Saudi Arabia)
- Market Investment Analysis- Discussing the various modes of investing in real estate property and real estate investment infrastructure provided by Saudi Arabia real estate ecosystem.
- Direct Investment
- Indirect Investment
- Competitive Landscape
- Market Share Analysis: Top players in Saudi Arabia market identified based on relevant market metrics
- Key Player Profiles: Pertinent details about player portfolio (area developed, past, current and future projects and others), property sectors covered, technological advances and services offered
Sample Commercial Real Estate Market Statistics
The commercial real estate market in Saudi Arabia report/study will contain data, analysis, commentary and infographics specific to the country and key cities covered.
Full and detailed analysis provided in the full report…
1. Executive Summary
2. Research Methodology
3. CRE Market in Saudi Arabia- Industry Outlook
3.1 GDP and Economic Activity
3.2 Consumer Confidence
3.4 Employment Rate
3.5 Interest Rates
3.6 Household Wealth
4. Regulatory Environment,CRE Laws and Key Policy Initiatives for the CRE Market in Saudi Arabia
5. CRE Market in Saudi Arabia -Market Dynamics
5.5 Technological Innovations
5.6 EHS Trends
5.7 Porter's Five Forces Analysis
6. CRE Industry in Saudi Arabia -Value Chain Analysis
7. CRE Market in Saudi Arabia -Market Data Analysis By Property Type
7.1.1 Market Size (USD million)
7.1.2 Total Supply:Historical and Forecast
7.1.3 Occupancy Rate and Vacancy Rate
7.1.4 Absorption Rate(%)
7.1.5 New Units/Project Launches
7.1.6 Market Share Analysis by Configuration, End Sector, etc
7.1.7 Market Trends (Average Capital Value Trends, Average Rental Values, Others)
7.2.1 Market Size (USD million)
7.2.2 Total Supply:Historical and Forecast
7.2.3 Occupancy Rate and Vacancy Rate
7.2.4 Absorption Rate(%)
7.2.5 New Units/Project Launches
7.2.6 Market Share Analysis by Configuration, End Sector, etc
7.2.7 Market Trends (Average Capital Value Trends, Average Rental Values, Others)
7.3.1 Market Size (USD million)
7.3.2 Total Supply:Historical and Forecast
7.3.3 Occupancy Rate and Vacancy Rate
7.3.4 Absorption Rate(%)
7.3.5 New Units/Project Launches
7.3.6 Market Share Analysis by Configuration, End Sector, etc
7.3.7 Market Trends (Average Capital Value Trends, Average Rental Values, Others)
7.4.1 Market Size (USD million)
7.4.2 Total Supply:Historical and Forecast
7.4.3 Occupancy Rate and Vacancy Rate
7.4.4 Absorption Rate(%)
7.4.5 New Units/Project Launches
7.4.6 Market Share Analysis by Configuration, End Sector, etc
7.4.7 Market Trends (Average Capital Value Trends, Average Rental Values, Others)
8. CRE Market in Saudi Arabia - Investment Analysis
8.1 Direct Investment (Public, Private, PERE and PPP)
8.2 Indirect Investment (REITs, REOCs, Others)
9. Competitive Landscape of the CRE Market in Saudi Arabia
9.1 Market Share Analysis
9.2 Key Player Profiles
9.2.1 Player Portfolio (Area Developed; Completed, Ongoing & Future Projects)
9.2.2 Property Sectors Covered
9.2.3 Technological Advances
9.2.4 Services offered
CRE Commerical Real Estate
GDP Gross Domestic Product
EHS Environmental, Health and Safety
PERE Private Equity in Real Estate
PPP Public Private Partnerships
REIT Real Estate Investment Trusts
REOC Real Estate Operating Companies