Jeddah residential rents up 14pc
Jeddah, November 13, 2011
The residential market in Jeddah gained momentum during the third quarter with the rental levels registering a 14 per cent growth over the year to date, said a report by property expert Jones Lang LaSalle.
The market has seen a continued increase in land sales during the year as trading volumes and sale prices have picked up further during the last quarter, JLL said in its report covering the Jeddah residential, office, retail and hospitality market sectors.
Soraka Al-Khatib, co-head of JLL Saudi Arabia, said, '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 per cent growth in average rents being recorded over the year to date.'
The JLL report pointed out that the King’s announcement of additional funding for the affordable housing sector has had a positive impact on the Jeddah residential market.
Following this, government-related entities such as JDRUC and PPA were now planning to deliver more than 30,000 additional residential units across Jeddah over the next few years, it added.
There is also strong continued interest in the luxury segment of Jeddah’s residential market, particularly along the city’s Corniche area, said the report.
'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,' said Al Khatib.
“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,' he added.
On the office sector, the JLL said although there has been a reduction in Jeddah’s CBD vacancy in the third quarter, office rents were likely to go down in 2012 once additional supply got 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, it added.
As a consequence, the office market is expected to remain tenant favourable during the next two years, the expert said.
On the retail market, the JLL report said the 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 per cent during the last eight months which demonstrates strong consumer spending. Pilgrim retail consumption during Hajj will provide a further boost to the sector over the remainder of 2011,' it added.
On the hotel market, JLL said the first three quarters showed a marked improvement in hotel occupancies with rates increasing 5 per cent year-on-year.
Commenting on the report, Craig Plumb, head of research at JLL Mena said: “The SR500 million economic stimulus package announced earlier in 2011 has sustained the Jeddah real estate market during the year.
'With Saudi’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,' Plumb added.-TradeArabia News Service