Home GCC Riyadh leads Saudi retail space growth with 90% occupancy A new report projects that Riyadh’s retail stock will expand by 28 per cent to 4.6 million square metres by 2026 by Marisha Singh July 12, 2024 Image credit: Getty Images Riyadh’s retail market occupancy rates have climbed to 90 per cent, up by 5 percentage points, while average rental rates have increased by 3 per cent to SAR2,725 per square metre (psm) for regional and super regional malls over the past year, according to Knight Frank’s Summer 2024 Saudi Arabia Retail Market Overview. Retail space supply The existing retail space in Riyadh totals 3.6 million square metres, with an additional 27,050 square metres added in Q1 2024. Faisal Durrani, head of Research, Knight Frank MENA, noted, “Saudi Arabia’s entertainment sector is undergoing significant liberalisation, spurring new cinemas, concert halls, theme parks, and sports complexes, reshaping the retail landscape and contributing to non-oil GDP growth.” Knight Frank projects that Riyadh’s retail stock will expand by 28 per cent to 4.6 million square metres by 2026. Market evolution Durrani highlighted the rapid transformation of Saudi Arabia’s retail and food and beverage sectors, with Riyadh at the forefront. He adds, “The rapidity of the evolution of the retail and food and beverage landscape in Saudi Arabia cannot be overstated and Riyadh sits at the heart of this phenomenal growth, which is also powering the kingdom’s economic diversification efforts.” A further 100,000 square metres of retail space is expected to be completed in Riyadh this year, emphasising the need for mall operators and retailers to remain competitive. “The fresh inventory of retail space likely to completed in the capital this year, which while welcome news for consumers, shines a light on the importance for mall operators, developers and retailers to double-down on experiential retail offerings in order to stay relevant and appealing.” Comparison with other cities In contrast, Jeddah and the Dammam Metropolitan Area (DMA) saw a slight decline in retail occupancy rates, now at 84 per cent and 89 per cent, respectively. Average rents in Jeddah dropped by 7 per cent to SAR2,465 psm, while DMA experienced a 1.3 per cent decline to SAR2,275 psm. FDI surge Saudi Arabia’s retail and e-commerce sectors have attracted significant foreign direct investment (FDI), bolstered by the government’s policy of 100 per cent foreign ownership. In 2023, 8,540 foreign investment licences were granted, a 96 per cent increase from 2022, with 186 licences for wholesale and retail trade services. Consequently, FDI inflows grew by 12 per cent to SAR72.3bn in 2023. Retail transformation Jonathan Pagett, Retail Advisory partner, Saudi Arabia, observed that Saudi’s retail scene is evolving towards unique, immersive experiences, especially in food and beverage and lifestyle segments. “What we are witnessing today in Saudi’s retail scene is a newly defined retail destinations and recent consumer demands evolving around ‘feels’ where purchases have become a by-product of shopping mall visitation with consumers continue to seek unique immersive experiences.” He stressed the importance of understanding consumer data to optimise footfall, conversion rates, and overall revenue. He adds, “With a particular focus on food and beverage and lifestyle retail developments, Saudi Arabia is undergoing an exciting transformation as it pivots towards steady adaptation to evolving consumer preferences and market dynamics.” E-commerce and digital integration The e-commerce market in Saudi Arabia grew by 28 per cent to SAR157bn in 2023, driven by increased internet and smartphone usage and government support for digital infrastructure. Amar Hussain, associate partner, Research-ME, Knight Frank, highlighted the shift towards digital payment methods and omni-channel strategies, crucial for meeting consumer preferences. Impact of giga-projects Giga-projects are set to transform Saudi Arabia’s real estate landscape, supporting the anticipated population growth to 40 million and attracting 150 million foreign visitors by 2030. The giga-projects will help develop over 5.3 million square metres of retail space, and 6 million square metres of office space in the kingdom. Of this, 2.8 million square metres of retail space, and 3.6 million square metres of office space will be constructed in the province of Riyadh alone. Projects such as Riyadh Expo slated for completion by 2030 will unveil a total soiree footage of 6 million square metres. Read: Trends shaping real estate in the GCC: An in-depth conversation with Anshuman Magazine of CBRE Tags Dammam Jeddah Real Estate retail space riyadh You might also like Dubai, Abu Dhabi rise in global real estate transparency index Scaling new heights: How AIX is redefining global investment opportunities Aldar unveils new luxe villa community on Yas island A sneak peek at the keynote speakers of 24 Fintech 2024