Rising incomes and changing lifestyles are helping to drive significant growth in the supply of high rise residential developments in the Kingdom of Saudi Arabia, as demand from residential tenants and investors is spurring modern luxury high-rise developments in Jeddah, Riyadh and the ‘tri-city’ area. Colliers International’s Modern Luxury: the Changing DNA of the KSA High Rise Residential Market provides a timely update on the state of the market and insight on the key trends likely to impact future development.
The Saudi residential landscape has transformed over the last five years, from comprising primarily of traditional residential high-rise towers to developers focusing on modern, luxury towers.
Jeddah’s Corniche is a prime location for skyward development, with Kingdom Tower, a symbol of luxury slated to be the world’s tallest tower when completed in 2018, at the heart of this trend. In Riyadh, the success of the Burj Rafal has triggered further developments, while residents in the ‘tri-city’ area of Damman, Khobar and Dhahran are also seeing an increase in supply.
New high rise developments are increasingly catering to demand from buyers for a greater mix of apartment types and sizes. Traditionally, owner occupiers demand larger apartments (3 bedrooms or more) as their primary residences, while investors or buyers of second homes, seek smaller apartment types. In Jeddah, 60% of buyers are expected to be owner-occupiers while the number of investors is expected to be higher in Riyadh.
Iconic developments, such as the Kingdom Tower, or high rise properties that have branded hotels and residences are leading the way, offering developers a way to justify premiums as investors seek high quality and well located properties. Iconic towers can also play an important role in driving interest in the surrounding area, with the Kingdom Tower expected to play a similar role to the Burj Khalifa’s impact on the Dubai Downtown area.
However, the focus on modern luxury means that there is a growing gap for ‘affordable luxury’ developments that maintain high standards while mitigating costs through simple design and efficient, smart buildings.
Imad Damrah, Managing Director, Colliers International in Saudi Arabia, said: “The strong demand for modern luxury high rise residential properties across Saudi Arabia is being demonstrated by high absorption levels among existing towers and pre-booking among forthcoming supply. While there is clearly a fundamental change occurring in this market segment, developers need to pay close attention to demand characteristics. Those developers with a strong reputation of delivery and partnership with iconic brands and commitment to luxury design, fittings and finishes will be best positioned to capitalize on the market opportunity. Furthermore, we see a clear gap appearing in the mid-market segment which is showing signs is undersupply given the overall shift in the market.”