JEDDAH

JLL,real estate investment and advisory firm has released its Q1 2016 Jeddah Real Estate Market Overview report that assess the latest trends in the office, residential, retail and hotel sectors. In Q1 2016, it was noted that Jeddah witnessed a general slowdown across its real estate sectors due to demand-supply mismatch and the country’s overall macroeconomic scenario.

“The existing demand-supply mismatch is expected to widen as more retail and office supply is expected to enter the market with the easing of backlog projects. In the residential segment, sales prices continued to decrease marginally while rents started slowing down in Q1 2016 after continuous growth in 2015. It is also interesting to see that higher quality residential developments are being launched in response to buyer demand for additional amenities. On the other hand, the office market witnessed a further slowdown in the growth of lease rates, which is expected to continue due to demand constraints throughout 2016. Historically, the government and public sector have led demand for office space in Jeddah, but going forward we expect a shift in demand towards private firms as there is hardly any new project announcements.”said Mr Jamil Ghaznawi, National Director and Country Head of JLL KSA.

“Meanwhile, in the retail market lease rates have showed signs of stabilisation in Q1 as vacancies are absorbed. With more projects materialising over 2016/2017, lease rates are expected to remain stable or decrease marginally. But with a Y-o-Y reduction of 9% in the value of retail sales , it could affect retail footfall which in turn will impact demand for retail space.”

“In regards to the hotel market, the sector is impacted by the general economic slowdown as a result of lower oil revenues affecting various demand drivers. With declining visitors, the hotel sector has begun to show signs of weakening across Jeddah. Interestingly, new supply is expected to be added as a number of hotels are expected to be completed later in 2016, and it remains to be seen how they will perform in this economic scenario.”

Office: 33,000 square meters of Gross Leasable Area (GLA) was added during Q1 2016.On an annual basis, average lease rates increased by 2%. However, Q-o-Q lease rates decreased marginally by 1%. Vacancy rates have remained relatively stable at 5% as of Q1 2016; down from 6% in the previous quarter.

Residential: The villa market saw a decline in both sale prices (-5.4%) and rentals (-2.5%) over the quarter. The decline in prices reflects the continued loss of buyer sentiment as a result of the previous 70% loan-to-value ratio, while rents also decreased as they are generally considered less attractive than apartments due to their higher cost.

Source: JLL

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