More than 120 international companies moved their regional headquarters to Riyadh in just the first quarter of 2024, according to a recent report.
This increase marked an impressive 447 percent rise compared to the same period last year, as detailed in a new Savills Middle East report.
The substantial relocation of global businesses to Riyadh is driven by strong non-oil sector growth and strategic government initiatives, including the HQ mandate that requires foreign firms to move their regional offices to the Saudi capital or risk losing lucrative government contracts.
Foreign direct investment also surged in Riyadh, showing a 5.6 percent year-on-year growth in Q1, indicating investor confidence in the Saudi economy.
Riyadh’s growing office market
Riyadh’s office market expanded by 3.4 percent year-on-year in Q1, surpassing initial forecasts and contributing to an anticipated 5 percent GDP growth for the year. This growth is supported by the kingdom’s economic diversification efforts, with the non-oil sector emerging as a key driver of economic expansion.
However, the influx of foreign companies has resulted in a shortage of prime office space, with Grade A occupancy rates reaching 98 percent. Consequently, office rents have steadily increased, rising 3 percent quarter-over-quarter in Q2 and 13 percent year-on-year.
“Limited prime office space in Riyadh, combined with strong business confidence, has pushed Grade A occupancy to as high as 98 percent, with rents steadily rising by 3 percent quarter-over-quarter in Q2 and a significant 13 percent year-on-year increase,” stated Amjad Saif, Head of Transactional Services at Savills in KSA.
Some areas, especially in North and North-East Riyadh, have experienced even steeper rent increases, with annual growth rates reaching 23 percent and 20 percent respectively.
“In the second quarter of 2024 alone, nearly 70 percent of inquiries received by Savills came from outside Saudi Arabia, with a substantial 50 percent specifically from US and UK corporations,” said Ramzi Darwish, Head of Saudi Arabia at Savills Middle East.
The surge in corporate relocations spans various sectors, including Technology, Media & Telecommunications, Consulting & Engineering, Manufacturing, and IT/ITeS. Notably, half of the recent lease transactions involved new companies entering the market, indicating a positive outlook for continued business expansion.
This corporate migration is attributed to several factors, including the strategic focus of Saudi Vision 2030 on attracting foreign investment and the government’s appealing investment incentives. The city has recently seen the establishment of regional headquarters by prominent entities such as PayerMax and Ernst & Young.
As Riyadh’s business environment continues to develop, a significant increase in Grade A office space supply is expected by the end of 2025. This influx of over 650,000 square metres of new space is anticipated to meet the growing demand and provide more options for incoming businesses.
