Office space in Riyadh to grow 60% in two years
Report says glut of new space will place further pressure on rents
A glut of new office space is expected to be released onto Riyadh's market within the next 12 months as the first wave of buildings at King Abdulah Financial District complete.
A new report by Jones Lang LaSalle states that more than one million square metres of commercial office space will be delivered onto the market over the next two years, which would bring the total amount of office stock in the city from 1.88m m2 at the end of 2012 to over 3m m2 by the end of 2014.
"New supply will increase substantially in 2013, with the completion of initial phases of the King Abdullah Financial District and the IT and Communications Complex," it said.
JLL warned, however, that the completion of some of this space "may be delayed as the market becomes oversupplied".
Vacancy rates are already rising due to new stock being completed, with the amount of empty space in the CBD rising to 18% by the end of 2012. This is impacting on rents, and although prime buildings continue to attact rates of around $500 per m2, rents for Grade A and Grade B properties slipped to $348 and $235 per m2 respectively.
"There will be further upward pressure on vacancy rates over the next 12 months given the expected new supply on the market," it added. "We expect that increased vacancy rates and the greater choice available to tenants will maintain downward pressure on rental levels during 2013, especially for Grade B properties."