Market Trends of Saudi Arabia Co-Working Office Spaces Industry
This section covers the major market trends shaping the Saudi Arabia Co-Working Office Space Market according to our research experts:
Saudi Arabia’s Office Spaces Market is on the Rise
Over the third quarter of 2021, Riyadh's office market saw the delivery of 330,000 sq. m. of office gross leasable area (GLA). These completions increased Riyadh's total stock to 4.8 million sq. m. In Jeddah, only 40,600 sq. m. of office stock was added in Q3 2021, bringing the total supply to 1.1 million sq. m. Demand was strongest from the government and banking sectors, which broadly targeted large floorspaces in northern Riyadh. The sustained growth in office demand was reflected in the rental trends. Indeed, Grade A rental values across the capital's key office districts were up by an average of 3% Y-o-Y to SAR 1,320 per sq. m. per annum in Q3 2021.
Meanwhile, in Jeddah, Grade A offices registered an annual increase of 4% to reach SAR 1,000 per sq. m. per annum. Office rents in the Grade B segment are expected to remain under downward pressure as there is a flight quality toward Grade A quality floor space in both cities. In the case of Riyadh, this is predicated on the oversupply situation in the Grade A segment as landlords have had to remain flexible by offering competitive commercial terms for larger occupiers on a deal-by-deal basis - such as longer rent-free periods, contribution towards fit-out costs, and increasing parking ratios, where possible. However, inquiries in the third quarter were mainly for smaller spaces, partly due to firms showing a preference for hybrid working. In the second quarter of 2021, the office stock within the office market in Riyadh amounted to 4.2 million square meters in Gross Living Area (GLA). At the same time, the office supply in Jeddah was 1.29 million square meters.
Increase in Urbanization Boosting the Market Growth
Saudi Arabia, the second-largest Arab state, is a nation in development. In a developing country, there is a tendency for the population to move to more urban cities where the employment rates are higher. Some of the biggest cities in Saudi Arabia have witnessed the urbanization changes first-hand. The capital of Saudi Arabia and the biggest city, Ar-Riyad, is home to about five million inhabitants. However, the high number of illegal immigrants in Saudi Arabia also accounts for the total population. In 2020, Saudi Arabia's population grew by approximately 1.58% compared to the previous year. In 2020, Saudi Arabia's total population amounted to 35.01 million inhabitants.
With increasing urbanization in the country, there is an increase in new job availability and employment opportunities in the urban areas of Saudi Arabia. With the increase in new job availability and employment opportunities, there is an increase in demand for working spaces in the country. The increase in urbanization is boosting the growth of Saudi Arabia's Coworking Office Spaces Market. Urbanization is defined as the share of the urban population in the total population of a country. In 2021, about 84.51% of the total population of Saudi Arabia lived in cities.
