Jeddah's office market shows signs of strength
Demand increase likely to be sated as office stock set to grow by 20%
A "remarkable" increase in demand for office space in Jeddah durnig the fourth quarter of 2012 caused rents to increase in all types of office accommodation across the city.
A report by Jones Lang LaSalle states that the amount of vacant office space in the city fell from 16% to 12% by the end of the quarter.
Some 37,000m2 of new office space came onto the market, with major new buildings completed including the 22,000m2 Kilani Building and the 4,000m2 Al Homaidi Tower on Madinah Road.
The consultancy said that the demand for new space came largely as a result of "increased government expenditure in sectors such as infrastructure, healthcare and transportation".
"There is also increased demand from the private sector, with opportunities for new multinational firms and investment banks to enter the market and strong interest from major existing companies to expand their business across Jeddah."
There has also been an ongoing migration from corporate occupiers from suthern areas of the city towards the north - one of the largest deals for new office space during the quarter was a move northwards by FMCG company Baeshen into 2,500m2 of new space.
JLL argues that vacancy rates within the city will continue to drop - at least for the first quarter of 2013 - as demand continues to increase. This has caused Grade A rents to climb to $291.20 (SR: 1,092) per m2 a year, while Grade B rents increased to $184 (SR: 690) per m2.
Demand is likely to ease as the year progresses, however, as a "major increase in supply" is forecast. The amount of office space is set to grow by 20% this year, with 125,000m2 of new stock set to be added to the current total of 623,000m2.