Riyadh Office Market Booms as Foreign Firms Flock to Saudi Capital

The Saudi capital, Riyadh, is experiencing a surge in foreign investment and corporate relocations. This trend, driven by the government’s economic diversification efforts, is leading to a booming office market with limited prime office space available.

A new report by Savills Middle East reveals a staggering 447% increase in foreign firms relocating their regional headquarters to Riyadh during the first quarter of 2024 compared to the same period last year. Over 120 companies have chosen Riyadh as their new base, attracted by factors like robust non-oil sector growth and government initiatives targeting foreign investment.

Economic Diversification Pays Off

Riyadh’s office sector is flourishing alongside the kingdom’s economic diversification efforts. The non-oil sector is emerging as a key driver of growth, contributing to a projected 5% GDP increase for the year. This robust economic performance is further fueled by a 5.6% year-on-year surge in foreign direct investment in Q1, signifying investor confidence in the Saudi economy.

The influx of companies has created a scarcity of prime office space in Riyadh. Grade A office occupancy rates have skyrocketed to 98%, with rents steadily increasing. Office rents have risen 3% quarter-over-quarter in Q2 and a significant 13% year-on-year. Certain areas, particularly in North and North-East Riyadh, have witnessed even steeper rent hikes, reaching 23% and 20% annual growth respectively.

Looking Ahead

Despite the current scarcity of Grade A office space, a significant increase is anticipated by the end of 2025. In fact, this influx of over 650,000 square meters of new space is expected to not only meet the growing demand but also offer more options for incoming businesses. Furthermore, the city’s focus on attracting foreign capital through initiatives like Saudi Vision 2030 and attractive investment incentives positions Riyadh as a prime destination for business expansion.

This trend of corporate migration to Riyadh spans various sectors, including Technology, Media & Telecommunications, Consulting & Engineering, Manufacturing, and IT/ITes. Moreover, the establishment of regional headquarters by prominent entities like PayerMax and Ernst & Young underscores the city’s growing appeal as a global business hub.

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