25 Jul 2024
RIYADH: The office market in Riyadh continued its strong performance in the second quarter of 2024, thanks to government investment incentives attracting international corporations to establish regional headquarters.
According to the latest Saudi commercial market report by Savills, over 120 international companies relocated their regional headquarters to the Kingdom’s capital in the first quarter of this year, marking a 477 percent increase compared to the same period in 2023.
The moves came after the Saudi government announced a range of benefits for those companies that set up Middle East bases in Riyadh, including a 30-year exemption from corporate income tax, withholding tax on headquarters activities, as well as discounts and support services.
Ramzi Darwish, head of Saudi Arabia at Savills Middle East, said: “The Kingdom’s ongoing efforts to diversify its revenue streams and create an attractive business environment are proving successful, as evidenced by the high volume of international inquiries.”
He added: “In the second quarter of 2024 alone, nearly 70 percent of inquiries received by Savills originated from outside Saudi Arabia, with a significant portion of 50 percent coming specifically from US and UK corporations.”
This growth in leasing activity was driven by sectors such as technology, media and telecommunications, consulting and engineering, manufacturing, and IT, with 50 percent of transactions involving new entrants, reflecting a positive market sentiment for expansion.
The British real estate consultancy firm noted that this trend is expected to persist, supported by a strong pipeline of inquiries for the remainder of the year.
The report also noted that the increase in leasing activity in the capital led to rent prices in North and North-East Riyadh seeing annual increases of 23 percent and 20 percent, respectively.
These price rises sit alongside foreign direct investment in the city rising 5.6 percent year-on-year in the first quarter of 2024.
“Limited prime office space in Riyadh, coupled with strong business confidence, has driven Grade A occupancy as high as 98 percent, and rents are increasing steadily, rising by 3 percent quarter-over-quarter in Q2 and a significant increase of 13 percent year-on-year,” said Amjad Saif, head of transactional services at Savills in KSA.
Savills noted that the city’s expanding market and promising economic prospects were attracting leading businesses from various industries, reinforcing Riyadh’s role as a crucial hub for both regional and global commerce.
It also noted that prominent companies such as PayerMax and Ernst & Young have established their regional headquarters in the Kingdom.
Other notable firms include Northern Trust, Bechtel, and PepsiCo, as well as IHG Hotels & Resorts, PwC, and Deloitte.