Market Trends of Jeddah Commercial Real Estate Industry
The Office and Retail Industry is Expected to Dominate the Market
Mirroring Riyadh, the demand for office space in Jeddah has been strengthening. The coastal region's business activity is at an all-time high. Many businesses, particularly those linked to the public sector, continue to grow given the number of large projects coming on stream.
Owing to a 15% increase compared to last year, Grade A rents currently stand at SAR 1,200 psm (USD 319.684 psm). Meanwhile, rents for Grade B rose by 9% over the previous 12 months and reached an average of SAR 780 psm (USD 207.794) per annum.
Occupancy levels across the board are increasing due to increased demand. Grade A office occupancy is currently at 95%, up from 90% in Q2 2022; grade B's rate was 86%. There are currently 1.3 million square meters of office space in use. Jeddah is expected to see an increase of 3% in its supply by 2025, with around 41,000 square meters set to go on the market. In the context of increasing demand, the lack of adequate supply signals that rents will continue to improve and that the favorable environment for landlords will likely be maintained.
In the second quarter of 2023, rental rates in regional and hyperregional malls fell across Jeddah's shopping area. Regarding supply, the store stock in Jeddah is estimated to reach 2.5 million square meters after The Village Mall is completed. Like Riyadh, mall operators and developers must do all they can to stay relevant in a competitive environment where the supply volume will grow significantly.
The Logistics Segment is Expected to Witness Significant Growth
The Jeddah Port in Saudi Arabia processed nearly five million TEUs of containers in 2022. The port handled approximately 4.9 million TEUs of containers compared to the previous year, representing an increase of around 2%.
Due to the shift of companies and investors, such as interest in Jeddah as a potential market for expanding and storing their products and goods, demand in Jeddah is expected to increase. A public, private partnership between the government entity Modon and private investors like Al Bandar Company will be established in most warehouses.
The Saudi Authority for Industrial Cities and Technology Zones (Modon) signed a partnership to establish, develop, and operate 14 warehouses with flexible areas in Jeddah's 1st Industrial City.
Warehouses will be based on intelligent, automated systems to provide quick and temporary logistical solutions for industrialists and entrepreneurs and stimulate investment in the retail sector. The project involves the construction of fully digital and automated warehouses that do not require human intervention, using the latest technologies and equipment that allow access to storage units through a mobile application that uses intelligent door locks.
