‘Physical Experience’ still preferred by some customers as KSA’s retail property market sees pick-up in activity

Abdullah Alshabanat

JLL Releases Q2 2021 KSA Real Estate Market Performance report

Riyadh, KSA – Despite the challenges of the global pandemic, retail property markets in Saudi Arabia witnessed higher footfall in malls and retail centers, according to JLL’s latest KSA Real Estate Market Performance report.

Saudi Central Bank (SAMA) announced that the point-of-sale (POS) transactions have been increasing over the past few weeks, and almost doubled compared to the same period last year. The POS transactions rose by 72% to SAR 40.3 billion in May 2021, from SAR 23 billion in May 2020. Data also showed that a total of 407 million transaction were processed in May 2021, an increase of 155% compared to the same period last year.

According to JLL’s report, the trend indicates that despite the change in consumer behaviours and the shift to e-commerce, many customers still prefer the ‘physical experience’.

“The high footfall across malls and retail outlets indicate solid economic recovery, which may be reflected on performance,” said Abdullah Alshabanat, Research Manager, KSA at JLL. Several Saudi retailers have been actively pursuing the adoption of hybrid business models to cater to the growing demand for online presence by adding fulfilment centers and enhancing the digital customer experience.”

“Going forward, to sustain performance of brick-and-mortar retail, the upcoming supply will remain focused on customer experience. We are likely to see an increasing number of unique lifestyle developments and digitization of stores to enrich the overall experience.”

According to the JLL report, Saudi’s retail market is expected to remain tenant friendly and with the significant amount of retail supply expected to materialize over the next few years, including Riyadh Avenue and Mall of Saudi in Riyadh, pressure on performance is likely to persist for the remainder of 2021.

During Q2 2021, the office sector saw the handover of 7,900 sqm of office GLA across the Kingdom. Demand for high quality grade A office spaces continued to improve during the second quarter, specifically in Riyadh, with the Healthcare/Pharma sector being the most active amongst corporate occupiers. Additionally, demand coming from the government sector remains strong, with a preference for large, standalone office buildings located in northern Riyadh, where the city is migrating. Going forward, the demand for office space is expected to remain strong, as several multinational occupiers are considering relocating their regional offices to KSA due to the incentives offered by the government.

In the residential sector, mortgages registered an annual increase of 48%, with a total value of SAR 71.4 billion, during the first five months of 2021 according to the Saudi Central Bank. This is a result of strong government support coupled with low interest rates. Construction activity in the residential market remained active, as various projects were delivered across the main cities, with around 26,500 units handed over during the first half of the year.

The hospitality sector is expected to witness increased demand for domestic tourism with the launch of the Saudi Summer program “Summer Vibes”, which aims to attract tourists to destinations from the shores to the colder mountain regions. The Saudi Entertainment Seasons are also expected to return with larger than ever events, starting with Riyadh season during the last quarter of 2021.

For further information on KSA’s commercial, residential, retail and hotel sectors, please see the report attached.


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