Savills, the leading global real estate services provider, today released its latest KSA market report analysing the rise of business parks in Riyadh. The report sheds light on the growing demand for office space in the capital and the introduction of Business Parks as an instrument to meet the requirements of businesses and to continue to attract/retain talents. The report also highlights the entry of new business sectors, completion of key infrastructure projects and its impacts on the office real estate landscape in the city going forward.
David O’Hara, Head of Saudi Arabia, Savills said: “The concept of office space has undergone significant changes over the past few years. It has evolved from the ‘cubical’ set-up in the nineties to ‘open plan’ desk space in the twenties and to ‘flexible’ and ‘co-working’ spaces today. This evolution has been driven by both changing business requirements as well as evolving employment needs.”
“The Kingdom of Saudi Arabia has been witnessing major changes over the past few years with its undergoing economic diversification which will result in rapid urbanisation and economic growth. With close to 40% of the country’s population between the age of 20-40 years, it’s imperative to incorporate their requirements while building projects. Riyadh is transforming smartly, hence the importance of introducing the concept of Business Parks to meet evolving and new business needs while attracting and retaining talent.”
Riyadh is the largest and the most preferred city for corporate expansion into the Kingdom. The city’s office market has undergone significant growth over the past decade both in terms of the quality of space and its geographic spread. According to Savills Report, the occupancy levels across office developments in Q3 2019 was around 85% for Business Parks, 82% standalone towers and 69% for mixed-used projects.
Most of the Business Parks are currently located and/or upcoming in the North East of the city, closer to international air connections. The traffic patterns also favour offices in this part of the city with metro construction creating major congestion in Central Riyadh.
Business Parks have proven to be more popular than traditional stand-alone buildings in Riyadh. Their popularity is due to various factors including more efficient office space layouts, generous car parking ratio for staff (22% more generous compared to stand-alone towers and mixed-use projects), visitors and ample retail, F&B and other social/community-based infrastructure. Since these parks are also gated and secured, they appeal especially to companies that require high level of security measures. Furthermore, companies benefit from co-locating near similar business clusters to collaborate on new solutions, and incubation of new technologies.
According to Savills Report, the rise of Business Parks is also likely to attract new and various business sectors in the next three years such as fintech, education, healthcare, entertainment, defense, transportation, consulting and others which are related to initiatives outlined in Saudi’s Vision 2030 to reduce dependency on oil and gas. The workforce in these industries requires well-planned working spaces, which Business Parks tend to provide.
O’Hara added: “From a property management and facility management point of view, the entry of global companies and introduction of investment grade supply will necessitate the services of professional companies to manage assets. This is important as it offers a competitive advantage and helps maintaining the quality and service offering of the asset relevant to the changing market requirements. For the moment, most of the developers prefer to carry out these services in-house but we expect this to change over the next few years.”
The growing young and educated population have also been the key drivers in the growth of co-working operators to provide holistic working environment. They currently occupy an average of 15% Grade A office space and their share is likely to increase to 20% over the next three years. Space take-up will be observed from existing global operators such as Regus, Spaces and Servcorp in addition to a number of local and regional operators such as Unbox.