“Headline rents offered at KAFD are high in comparison to existing market norms, but terms are flexible and there is room for negotiation on incentives. In the existing prime office areas in the southern central areas, office rental rates are starting to come under downward pressure and new supply in these areas is forcing both lower headline rents and more generous incentive packages,” said Mike Williams, Head of Research & Consultancy, CBRE Middle East.

In contrast to both these areas a number of business park projects that have recently emerged in northern Riyadh such as Granada Business Park, ITCC and Riyadh Business Gate have proved extremely popular, notes the CBRE report.

“All three of these projects are either fully occupied or nearing full occupancy at strong rates and without significant support from incentive packages. These projects have successfully met market requirements by providing good access, parking and quality as well as being located in the northern parts of Riyadh that are attracting increasing interest,” added Williams.
The CBRE report said the supply of prime office space in Jeddah looks set to jump with the completion of The Headquarters Business Park in the second half of 2013, but growth in demand largely driven by government expenditure on infrastructure will likely moderate the threat of oversupply. Rental rates in Jeddah remained static in the first half of 2013 despite a slight drop in vacancy rates during the same period
“International firms engaged in implementing government infrastructure projects will likely absorb much of the new and existing space, and there is likely to be a relatively balanced environment where neither supply or demand move significantly out of line,” commented Williams.

Moreover, the report said overall levels of economic activity in Al-Khobar have historically been driven largely by Saudi Aramco, augmented by family firms and small branches of international or regional consultancies. Saudi Aramco has embarked on a transformation program to become the world’s leading integrated energy and chemical company by 2020.
In addition, the growth of the industrial city of Jubail has also driven the office market in Al-Khobar as engineering firms enter the market in order to serve the three main drivers for economic growth in Eastern Province which are Saudi Aramco, Jubail Industrial City and Saudi government infrastructure initiatives.

“As it relates to office space, supply, demand, quality and rental rates have all risen consistently since 2000 and there have been no reverses in any of these categories for over a decade. Rental rates in existing properties have remained virtually static since 2008, however, rental rates for local Class A space have risen, due largely to improvement in the quality of local Class A space entering the market,” added Williams.
“Rental rates for space that would be considered local Class A space now lie in quite a broad range from around SR800/m²/pa to SR1,300/m²/pa with the most recently completed buildings commanding the highest rents,” Williams noted.

Speaking to reporters after visiting the mayoralty headquarters on Tuesday, Prince Mishal urged the mayoralty employees to interact with the public with full transparency and meet their requirements without any hassles and within a short span of time.

The governor underscored the need for stepping up efforts and strengthening cooperation among major sections and branches of the mayoralty in improving the services extended to the citizens.

“The mayoralty is a major government machinery that shoulders great responsibility concerning the citizens and extending them the best services in various fields including keeping the city clean and tidy and ensuring proper operation and maintenance of roads, bridges, tunnels and pavements. Keeping the city clean is a major task, which is being fulfilled by the mayoralty,” he said.

According to Prince Mishal, the mayoralty is exerting all efforts to perform this duty and has made big budgetary allocations for the purpose.

“The mayoralty has divided the city into nine regions and awarded cleaning and waste disposal contracts to several companies.” The governor thanked Mayor Hani Abu Ras and other officials for their role in sincerely serving the citizens.

Abu Ras said the governor was briefed on the ambitious project of “Heart of Jeddah” which will be developed on a total area covering one million sq. meters. “This will be one of the gigantic eco-friendly projects consisting of transportation network, infrastructure and service projects,” he said adding that this will be one of the best examples of public-private partnership and cooperation in development.

“Among the limits and challenges facing Saudi developers, is for example the regulations concerning the Municipality’s issuance of licenses, which must have a shorter processing time from the current minimum of at least two years up to a maximum of four years. In addition, the government should revise the mortgage law further, as we feel that the implementation of the current draft will have a negative effect on developers and financing companies,” said Riyad Ahmed Al-Thaqafi, CEO, Ewaan, said as he gave the keynote address called.

He added that there is a need for the government to appoint an agency that will regulate land prices to stop price escalation and manipulation. The government should also work to change the community culture of a majority of the population’s belief that they need a 200 or more square-meter home in order to own a house.

Al-Thaqafi also said that the two factors that would affect the housing sector through 2025 is rising population growth and decreasing income levels. In Saudi Arabia and the GCC, the main driver causing a housing crisis in major cities is urbanization or the migration of rural residents to live in the cities of Jeddah, Riyadh and Dammam.

“It is expected by 2025 that urbanization will increase the population of large cities by between 52 and 58 percent, causing more demand for housing that very few will be able to afford due to increased inflation and a lower income level,” Al-Thaqafi said.

A lack of affordable housing and the increase of unemployment are the main social instigators underlying the social unrest over the past two years in the Arab world.

Among solutions offered by Al-Thaqafi is to improve development management processes such as an increased use of construction technology, stoppage of land prices speculation and education of consumers to prefer and enjoy living in smaller and more affordable residences.

He said that another idea could be the implementation of a new governmental body for financing real estate projects backed by the Capital Market Authority (CMA) that could provide project financing in place of banks, which usually do not want to offer financing for most projects.

“The government must realize that it cannot compete with the private sector in this matter, but must work with private sector developers in finding solutions,” Al-Thaqafi said.

Representing a semi- government-back project, Mohammed Bawaked, executive vice president, Jeddah Development & Urban Regeneration Company, owned by the Jeddah Municipality, spoke about their new development in Jeddah called, Salman Bay.

The mega-housing project is being developed on an inland bay about 20 kilometers north of Jeddah on about 3.2 million square meters of land as part of the city’s future development plans. It will accommodate 25,000 units of apartment buildings dedicated to affordable housing. It will cater to 95,000 residents.

“While working to develop this project, we found many obstacles such as mainly financing issues with banks not wanting to offer financing,” Bawaked said. “We ended up overcoming this by finding internal financing by proposing to the contracting company to implement the work with no down payment, in which they accepted.”

He also said that other challenges lie in choosing the appropriate design to be of a comfortable size that consumers would like and still be deemed, “affordable.”

“It was difficult. We performed the study many times and had to change the design several times before coming up with a suitable design. In addition, we have arranged deals with the Saudi Electric Company (SEC), National Water Company (NWC) and stakeholders to come up with high level, but reasonably priced housing,” he said.

said that he agrees that there are many changes that must be made in order to find solutions, the most important being the public and private sector’s mutual participation in solving the housing crisis. The second, that instead of blaming the government, all developers must realize they have a role to play in cooperating.

“We are all capable of making positive changes if we all take up the responsibility,” he said.

Rayadah Investment Company, the real estate arm of the Saudi Public Pension Agency, showcased its mega residential project in north Jeddah, which is expected to cover 10 percent of the total real estate market needs for the next 10 years. Located in Obhur, Al Raeda Residential project comprises 8,000 units on a 2.5 million-square-meter site.

It is divided into 10 neighborhoods, five allocated for residential buildings, and five for villas, in addition to central zone for multipurpose usages. The project also comprises 24 schools, 15 mosques, general hospital, health club and a hotel supported with commercial shops to service guests.

Maceen Capital, a specialized and dynamic investment group, is present at Cityscape Jeddah this year to promote its SR 83 million real estate fund invested in developing a residential project in north Jeddah -Villatee Residential Project consisting of 52 upscale villas in a unique location in Obhur. The villas are available in five different architectural designs and sizes catering to different tastes and lifestyles.

“The location was selected very carefully to offer a unique living experience where new Jeddah is being shaped,” said Bader Al-Hammad, CEO of Maceen Capital. “The project is scheduled to be completed in two years and all services and facilities are available in location to guarantee a quiet, flexible and successful lifestyle.”

“Bawabat Makkah is a visionary city to be built on the western edge of the Makkah Holy Region, adjacent to the boundary line of the Jeddah-Makkah Expressway. The area of the city will occupy approximately 1.8 square km land and will provide much needed suitable residential housing to an estimated population of 25,000 people,” Khaled Al-Telmesani, CEO of Sumou stated.

Masharef Residential Project, developed by Kinan International Real Estate Development, also grabbed visitors’ attention. The 1 million M2 project site is located north of Jeddah and offers a wide range of products such as villas, apartments and residential/commercial lands. Kinan’s project targets the mid-income segment and the first two phases of the project has already been sold. Handover of units for the first phase began at the end of 2012.

Mace, the UK consultancy and construction company, will manage the development in a joint venture with building consultant EC Harris, part of Dutch group Arcadis. The skyscraper will be built by the Saudi construction company Bin Laden Group.

The tower’s height is planned at three times the height of the Shard (at 308 metres), and will take over from Dubai’s 828-metre Burj Khalifa as the world’s tallest skyscraper. It will include a hotel, serviced apartments and luxury condominiums.

Plans were unveiled 18 months ago by Saudi billionaire Prince Alwaleed bin Talal as the centrepiece to the Kingdom City development in Jeddah, a major Red Sea port.

Saudi Arabia is undertaking multibillion-pound projects to improve its infrastructure and meet its growing housing needs, spending more than £263bn in the five years to 2013.

Construction should start this summer, taking just over five years.

The project, called Airport City, will come up on a 10sq km area and is targeted to be completed over a 30-year period. The masterplan has been conceived as a series of four “circular districts”, connected by what is called a “Green Spine”, running parallel to Hamad International Airport’s second runway. The four zones will be Business District, Aviation Campus, Logistics District and Residential District.

In the first 10 years of the 30-year masterplan (expected to be completed by 2022), substantial parts of the Business District and all of the Aviation Campus will be developed. The Aviation Campus will be traversed by a long podium, a symbolic entrance to the Airport City and the location of the headquarters for Qatar Airways and the Civil Aviation Authority. The Airport City concept is “targeted at optimised development of the transport hub of an airport and its surrounding airside and landside supporting functions,” Hamad International Airport said yesterday. The project, a clustered development, will have many green spaces that will interlink and together branch out to one large park across the full span of the site. The branches may take the form of walkways and promenades, wide boulevards, public parking and other outdoor amenities.

The Business District will be centred on a Terminal Complex that will contain a second terminal for the airport and a train station for Doha with metro and long distance rails. The terminal’s plaza, connecting air and ground transport, will be an intersection of the international and local traffic. “The project demonstrates Qatar’s tremendous potential and its unique approach to development, while also providing the flexibility required to support its inevitable future growth,” HIA said.

Qatar already plans to have a second terminal at the new Hamad International Airport in time for the FIFA World Cup and dedicate the first terminal to the use of national carrier Qatar Airways.

“It is part of our long-term vision. As we are hosting the FIFA World Cup in 2022, one of the commitments is to have another terminal. Once that’s ready we will move other airlines to the second terminal and dedicate the first one to Qatar Airways,” the Civil Aviation Authority chairman and managing director, HE Abdul Aziz al-Noaimi, told Gulf Times recently.