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Office space demand rises in Riyadh due to the growth of start-ups

Saudi Arabia - February 12, 2019

Riyadh witnesses rising demand for office space that caters specifically to small businesses and startups despite a strong supply pipeline.

Total office space in Saudi Arabia’s capital stood at 4.2 million square meters of gross leasable area (GLA) by the end of 2018, according to broker CBRE, with an additional 870,000 square meters expected to be delivered by 2022.

It follows a number of Government-led initiatives aimed at stimulating private-sector growth and promoting a spirit of innovation and entrepreneurship in line with Vision 2030, CBRE said.

The broker’s Market Snapshot for 2018 also highlights a growing trend for office supply as part of mixed-use development.

Rents remain under pressure in the Saudi capital with both the primary and secondary office rents down by about 4% and 7% year-on-year respectively.

But increased incentives by landlords, discounts for long-term leases, and other tenant perks could help to mitigate declines in the market.

The opening up of the entertainment industry in Saudi Arabia could also boost the hospitality sector, which has traditionally been driven by corporate demand in Riyadh.

However in the short term at least, CBRE expects daily rates to remain under pressure.

According to CBRE’s Market Snapshot, more than 5,000 keys are expected to be delivered to the market by 2022.

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