JLL: Slowdown in Jeddah real estate in Q1 2016
The existing demand-supply mismatch in Jeddah is expected to widen as more retail and office supply will enter the market with the easing of backlog projects
In Q1 2016, Jeddah witnessed a general slowdown across its real estate sectors due to demand-supply mismatch and the country’s overall macroeconomic scenario, according to a recent report.
As per JLL's Q1 2016 Jeddah Real Estate Market Overview report, the existing demand-supply mismatch is expected to widen as more retail and office supply is expected to enter the market with the easing of backlog projects.
Jamil Ghaznawi, national director and country head of JLL KSA, commented: “In the residential segment, sales prices continued to decrease marginally while rents started slowing down in Q1 2016 after continuous growth in 2015."
"It is also interesting to see that higher quality residential developments are being launched in response to buyer demand for additional amenities."
On the other hand, the office market witnessed a further slowdown in the growth of lease rates, which is expected to continue due to demand constraints throughout 2016.
Historically, the government and public sector have led demand for office space in Jeddah, but going forward the report said that a shift in demand towards private firms as there is hardly any new project announcements.
Meanwhile, in the retail market lease rates have showed signs of stabilisation in Q1 as vacancies are absorbed. With more projects materialising over 2016/2017, lease rates are expected to remain stable or decrease marginally.
But with a Y-o-Y reduction of 9% in the value of retail sales , it could affect retail footfall which in turn will impact demand for retail space, as per the report.
In regards to the hotel market, the sector is impacted by the general economic slowdown as a result of lower oil revenues affecting various demand drivers. With declining visitors, the hotel sector has begun to show signs of weakening across Jeddah.
Ghaznawi added: "Interestingly, new supply is expected to be added as a number of hotels are expected to be completed later in 2016, and it remains to be seen how they will perform in this economic scenario.”