Riyadh is experiencing significant growth in its commercial real estate sector, with rents for Grade A office spaces reaching SR2,700 ($719.95) per square meter by the end of March, according to a recent analysis. This marks a remarkable annual increase of 23 percent, driven by successful government initiatives, including the regional headquarters program.

The Real Estate General Authority of Saudi Arabia anticipates that the property market will grow to $101.62 billion by 2029, with an expected compound annual growth rate of 8 percent starting in 2024. Faisal Durrani, partner and head of research for the Middle East and North Africa at Knight Frank, stated that Saudi Arabia’s economic momentum is strengthening across key sectors, fueled by rising activity in the private sector.

By the end of March, the occupancy rate for Grade A office spaces in Riyadh reached 98 percent. In contrast, Grade B office spaces saw a 24 percent year-on-year increase in rents, with an occupancy level of 97 percent. Grade A offices are typically more expensive due to their prime locations, modern infrastructure, and recent construction, whereas Grade B offices offer a more affordable option.

The growth in demand for prime office spaces is further highlighted by the announcement from about 600 companies planning to establish their regional headquarters in Saudi Arabia by the end of February. The Kingdom’s regional headquarters program offers several incentives, including a 30-year exemption from corporate income tax and withholding tax, along with various discounts and support services.

Durrani noted that Saudi Arabia issued a record 14,303 foreign business investment licenses in 2024, marking a 67 percent increase from the previous year. This surge underscores the Kingdom’s enduring appeal to global corporations and investors.

In Jeddah, the commercial real estate sector is also witnessing notable growth, with both Grade A and Grade B office occupancies reaching 95 percent by the end of March. Grade A office rents in Jeddah hit SR1 280 per square meter, reflecting a 4 percent year-on-year growth, while Grade B office rents increased by 6 percent to reach SR845 per square meter.

The total office stock in Jeddah is expected to rise from 1.6 million square meters this year to 1.8 million square meters by 2027. James Hodgetts, partner for occupier strategy and solutions at Knight Frank, mentioned that as companies expand their presence in Saudi Arabia, Jeddah is attracting more regional and local firms, supported by a healthy pipeline of office developments.

Upcoming projects in Jeddah include Jeddah Gate, which is set to deliver 230 000 square meters of office space between 2025 and 2028, and Jeddah Rose, a mixed-use development anticipated to provide 25000 square meters of office space by the end of 2025.

In addition, Jeddah Municipality recently announced 29 new investment opportunities across over 1.4 million square meters, targeting various sectors including commercial, industrial, residential, and recreational.