Capitalizing on the Growth of Saudi Residential and Commercial Markets
Explore opportunities in Saudi's residential and commercial markets driven by giga projects, urban growth, and rising demand for office and housing spaces.
Infrastructural improvements continue apace all over Saudi Arabia, catalyzing the transformation of the Saudi real estate market and laying the foundation for sustained expansion across residential and commercial segments.
This article is aimed at helping global construction companies explore opportunities in new areas of demand growth across construction subsectors to drive operational efficiency gains.
Surging Business Expansion Activity in Saudi Support Volume Growth in Commercial Real Estate
Saudi Arabia's thriving commercial real estate is mainly driven by expanding non-oil industries, the country’s strong tourism appeal, and rising urbanization. The increasing waves of businesses expanding to the Kingdom are a key element in the overall strategic market upswing.
Recent reports showed a metric rise in the number of investment licenses issued by the Saudi Ministry of Investment (MISA) this year, with a total of 3850 granted in Q3. The construction sector is among the top sectors that collectively accounted for over 72% of these licenses, indicating its potential for future growth.
These developments coincide with a growing trend of multinationals setting up their regional headquarters in Saudi; now, the country is home to 540 multinationals (MNCs) with RHQs, an achievement that came six years ahead of schedule.
With that in mind, Riyadh has been and will continue to be a global corporate center, which in turn helps fuel demand for office space, create jobs, and attract foreign capital. Riyadh is projected to be among the 15 fastest-growing cities worldwide by 2033, outperforming global metropolitan centers like Beijing, Houston, London, Munich, Paris, San Francisco, and Tokyo.
Quick Market Facts:
- The commercial real estate market was valued at $20.71 billion in 2023 and is projected to reach $31.35 billion by 2028.
- Riyadh’s premium office space has achieved a near-full occupancy rate of 98% in Q3, driving 19% YoY growth in rental prices.
- The office space demand surged by an impressive 65% in Q1 2024.
To accommodate the heightened demand for offices, it was believed that Riyadh plans to develop over 1.6 million square meters of Grade A office space by 2028. The country’s giga projects, along with its economic districts and special economic zones (SEZs), are contributing to the sector’s development and the overall Saudi thriving corporate landscape.
Having played a leading role in expanding more than 700 companies in Saudi, AstroLabs has a string of office spaces located in the heart of AlMalga, Riyadh, providing an ideal launchpad for high-growth businesses from all over the world seeking to make a foray into the world’s fastest-growing economy.
Urban Renaissance Supports Diversity of Residential Real Estate Market in Saudi Arabia
Following the same growth trajectory, the residential sector is experiencing its own renaissance, driven by government initiatives aimed at increasing homeownership rates to 70% under Vision 2030. These efforts have already yielded profoundly satisfying results, with Saudi homeownership reaching 63.74% by the end of 2023, a 16.7% point increase from 2016.
Quick Market Facts
- The residential real estate sector has been growing at a 4.5% CAGR since 2017, expected to double by 2028, reaching SR51 billion ($13.5 billion).
- In the first half of 2024, residential transactions accounted for 61% of all real estate deals by value, with nearly 91,860 sales representing a 41% increase in volume.
- The percentage of homeownership has exceeded 63%, up from 47% in 2016.
The combination of government support through programs like Sakani, increasing mortgage accessibility, and strong transaction growth makes Saudi Arabia's residential construction sector particularly attractive for international companies looking to expand their operations in the region.
Key initiatives like Real Estate Investment Traded Funds (REITs) have made the market more accessible to international investors, facilitating capital flow into the Saudi real estate market.
On a broader level, mixed-use developments are emerging as a dominant force in the Saudi real estate market; these hybrid environments combine various uses in a single development and are rapidly gaining immense traction among developers and investors in Saudi.
This is mainly driven by consumers' demand for greater convenience and efficiency as well as the government’s focus on nurturing sustainable building practices aligned with Vision 2030’s environmental goals.
How to Become Part of the Saudi Real Estate Success Story
Saudi Arabia’s vibrant economic landscape, teeming with diverse, appealing prospects in the commercial and real estate sectors, beckons foreign investments. Construction companies wishing to maximize their returns will find an open market for their operations in the Kingdom’s construction sector, the largest in the world by 2028.
Establishing a presence in Saudi is a surefire way to capitalize on numerous investment opportunities, driven by the urgent need to complete large-scale initiatives such as giga projects and the ongoing preparations to host global events like the 2025 Winter Asian Games, 2034 FIFA World Cup, and 2030 Riyadh Expo.
With its business expansion platform, AstroLabs plays a matchmaker role, facilitating a streamlined Saudi market expansion and introductions with key industry stakeholders among critical support services that aim to ensure continued business growth.
For companies looking to enter the market, powerful initial steps include acquiring the MISA license, drafting the AoA, and acquiring commercial registration; these form foundational requirements to ensure successful incorporation.
In keeping with the promise to fulfill all the compliance requirements for foreign businesses, AstroLabs enabled more than 70 construction companies to run a business successfully and gain a foothold in the Saudi construction sector.
These include big names like CPG Corporation (Singapore), Waagner Biro Steel and Glass (Austria), Grankraft (UAE), and Konn Technologies (Jordan).
