Jeddah: Gateway to the future

OPEN SHOP: This street is OK, but stretches of Jeddah need bulldozing and rebuilding.

Jeddah is known as the ‘gateway city’ in Saudi Arabia. However, the gate has been stuck half open for a number of years as poor roads, an ancient port and near slum-standard housing has created an area crying out for money to be spent.

Fortunately, it is now getting that investment - creating opportunities for us all in the machinery industry.

With an expected population growth of 2.25 million by 2029, there is a high demand for residential properties, and while it's all well and good producing luxurious state of the art towers, the real problem lies in the old parts of the city where, according to a report put forward by Jones Lang La Salle in June, there are around 900,000 people living in ‘unplanned settlements,’ otherwise known as slums.

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

“Jeddah scored relatively poorly in our recent MENA Investor Sentiment Survey, with investors ranking the city below others in the region on a range of criteria including infrastructure, sustainability and real estate market transparency,” the report says.

Over the years there has been a preference for low-density buildings and high land-take development, which affects affordability as it drives up demand for, and therefore the price of, land. This has lead to a severe under supply of low-cost housing.

Mortgage
A lack of a mortgage law in the city is also leading to the younger generation living with parents or forced into ownership with huge debts.

“The residential sector has been negatively impacted by reduced consumer confidence and limited credit availability that has particularly impacted the sales of waterfront property,” Jones Lang La Salle research manager Fayyaz Ahmad says. Jeddah Development and Urban Regeneration Company (JDURC), an executive arm of the Jeddah Municipality, is at the heart of initiatives to improve this situation and in May this year it put forward the Jeddah Strategic Plan, mapping out the city’s development over the next 20 years.

“The demand is really high in the city. People are taking advantage of the drop in building material prices and are constructing more,” strategic management of land and property for the Jeddah Development and Urban Regeneration Company vice president Dr Abdullgader Amir told us.

But he also explains: “The supply [of housing] is not yet close to meeting the demand.”

Regeneration
As part of the 20 year plan, the overall aim for Jeddah is to produce 283,000 housing units to meet immediate deficiency. These must include 80,000 affordable and 151,600 replacement housing units for the currently inadequately housed population in planned and unplanned areas. JDURC also aims to provide an additional 670,000 units by 2029 to accommodate population growth.

According to Amir, the most important plan for Jeddah is for the redevelopment of the Khozma and Ruwais areas of the city.

Joint ventures have been created with private developers and investors to clear and rebuild these run down areas.

JDURC’s strategy is to relocate people from these areas to new and affordable communities to the east of Jeddah.

Redevelopment
Another initiative is the City Centre Development Corporation, a consortium involving the Jeddah Amana and private developers led by the Urban Development Company.

This strategy includes the improvement of the city’s infrastructure. For example, there are plans in place to develop the US $6 billion (SAR22.5 billion) Makkah-Madinah Railway, a high speed electrified passenger line, which aims to reduce congestion on the roads during the annual Hajj; the Saudi Land Bridge, composed of two lines running from Riyadh to Jeddah and Dammam to Jubail; and the expansion of King Abdulaziz International Airport and Jeddah Islamic Seaport (JIP).

“A new terminal will be built along the re-export zone in JIP and shall accommodate one of the biggest container vessels. The expansion will help maintain Jeddah’s leading role as the hub port of the region,” adds Ahmad.

Recovery
Jeddah is also aware that it needs to improve the city’s public spaces and visual amenity. With this in mind, projects such as the US $1.6 billion Jeddah Gate are being developed across the region.

Jeddah Gate will contribute to the needed supply of housing by including 6000 residential units.

According to Ahmad, other industries including retail see the financial crisis as a unique opportunity to build new projects.

“Most sectors have seen increased levels of new supply enter the market, at a time of subdued demand, resulting from the global economic slowdown and tight credit conditions,” he says.

With all these plans in the pipeline, Jeddah’s gateway to the city could finally swing wide open. And, according to Amir, the city has a lot of potential.

“Jeddah is very unique because it is the commercial and tourist capital of Saudi Arabia and it is also the most cosmopolitan city in the region,” he concludes.

Emaar has said that phase one of the US $1.6 billion Jeddah Gate development is on track to meet its 2010 construction deadline which is being built at the moment.