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Property professionals should think about moving to Jeddah
Q3 2011 sees Jeddah’s real estate market enjoy the effects of additional government funds for housing as prices increase in retail and residential space; office space expected to drop, though.
November 16, 2011 3:31 by Precious de Leon
Expectedly, the King’s announcement of additional funding for the affordable housing sector has had a positive impact on the Jeddah residential market, as reported by Jones Lang LaSalle in its recently released report, “Jeddah Real Estate Market Overview – Q3 2011”.
Following the announcement, government related entities such as the Jeddah Development & Urban Regeneration Company (JDRUC) and the Public Pension Agency (PPA) are now planning to deliver more than 30,000 additional residential units across Jeddah over the next few years.
“The SAR 500 million economic stimulus package announced earlier in 2011 has sustained the Jeddah real estate market during 2011. With Saudi Arabia’s oil output having been boosted to offset lower supply from other MENA producers and oil prices remaining relatively stable over recent months, there is likely to be increased investment in the infrastructure and real estate sectors of the economy over the next 12 months. The residential sector is likely to remain the ‘hot spot’ during 2012, with further opportunities to create more affordable housing products. Moreover, continued growth in real estate financing and private sector lending will give a further boost to the overall real estate industry,” Craig Plumb, Head of Research at Jones Lang LaSalle MENA.
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Covering the city’s residential, office, retail and hospitality market sectors, the paper also reveals a strong continued interest in the luxury segment of Jeddah’s residential market, particularly along the city’s Corniche area.
This trend is further illustrated by the announcement of the Al Jawarah and Kingdom Tower projects. Due to be delivered in 2013 and 2016 respectively, these two projects will provide the first branded residences for sale in the Jeddah market.
“The Jeddah market has seen a continued increase in land sales during 2011 as trading volumes and sale prices have picked up further during the last quarter. There is strong interest from developers to deliver additional residential supply to meet the city’s growing requirements. Rental levels have also increased with a 14% increase in average rents being recorded over the year to date,” said Soraka Al-Khatib, Co-Head of Jones Lang LaSalle Saudi Arabia.
“The strength of the Jeddah residential market is confirmed by the fact that most of the 16,000 units coming to the market over the remainder of 2011 have already been sold. The limited future supply pipeline and the city’s growing population is expected to drive prices and sustain demand throughout the remainder of 2011 and into 2012. Major investment in infrastructure, transport, health and education sectors will further reinforce Jeddah’s market position.”
This upward trend proves the effectiveness of using public funding to quell any hint of unrest in the Kingdom, which then trickles down to the health of sectors across the board, and in this particular instance, in property.
Here’s a look at the rest of the report’s findings: (with accompanying summary from JLL…our apologies if it they are a bit blurry for your liking)
Although there has been a reduction in Jeddah’s CBD vacancy in Q3, office rents are likely to reduce in 2012 once additional supply is released to the market. The expected CBD supply pipeline will provide approximately 60,000 sq m GLA of additional space to the current stock of 445,000 sq m by the end of 2012. As a consequence, the office market is expected to remain tenant-favourable during the next two years. Competition will concentrate on quality office space and landlords of older and secondary buildings will be required to develop their offerings by improving workplaces, enhancing security and increasing parking provision to attract occupiers.
Retail centres continue to benefit from high occupancy rates and the majority of the new supply has already been preleased. Retail sales have increased by more than 30 percent during the last eight months which demonstrates strong consumer spending. Pilgrim retail consumption during…(CONTINUED TO NEXT PAGE)
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