The hospitality sector of the Saudi city of Jeddah will continue to grow, according to a new report released by real estate consultancy firm CBRE.
CBRE’s 2018 Jeddah Market Snapshot revealed that the Red Sea city saw revenue per available room (RevPAR) and average daily rate (ADR) up 8 percent and 10 percent respectively year-on-year.
It added that an additional 6,400 keys are expected to be delivered to market by 2022, in addition to an existing supply of 13,760 keys.
Simon Townsend, head of Strategic Advisory at CBRE MENAT and general manager, CBRE Saudi Arabia, said: “Saudi Arabia’s recent focus on developing its entertainment sector is already stimulating important growth across a range of sectors including hospitality.
"Large-scale infrastructure including projects such as the Jeddah Opera, the Obhur Bridge and the tram on the Corniche, will further add to the city’s growing reputation as an important cultural, leisure and business hub in the Kingdom.
"This market, as witnessed by the entire region, has experienced downward pressures over the last year. However, promising opportunities are consistently arising across all asset classes, and continued investment by the government will only serve to further grow confidence in Saudi Arabia’s real estate sector.”
The report said new trends are emerging in the market, specifically relating to delivery in residential communities such as J1 and Diyar Al Salam. As the city continues to expand to the North, CBRE expected increased activity and the delivery of similar projects.
“Through the ‘Sakani’ program, the KSA Government is looking to increase the rate of home ownership among its citizens by 60% in 2020 and by 70% in 2030,” it said, adding that collaboration between the public and private sectors in the development of affordable housing will be key in attaining government targets.
The office sector is also witnessing a greater move towards more flexible leasing, whilst landlords are adding facilities such as F&B and on-site retail to further attract corporate clients, said the report.
“There is an existing supply of 1.13 million sqm gross leasable area (GLA) in Jeddah, with an additional 0.04 million sqm GLA expected to enter the market by 2022. Like many major cities regionally, there has been some downward pressures on rental performance with underlying rentals seeing a decline year on year of up to 10%.”
“To alleviate pressure, landlords need to start adjusting the nature of their offering to cater to the requirements of tenants – these include greater flexibility with respect to lease terms, the addition of alternate facilities, such as F&B, which can act as a catalyst to attract more corporate tenants,” said Townsend.
