Real estate transactions in the Kingdom hit USD 29 bn in 1Q 2025, showing positive market fundamentals, according to a report (pdf) by real estate consultancy CBRE. Fueled by robust demand in Riyadh’s residential, office, and hospitality markets, this momentum was supported by proactive government measures, strong investor sentiment, and continuous advancement in the construction industry.

On the office front, Riyadh saw demand outpacing supply, pushing Prime rents up 17% y-o-y, Grade A up 25%, and Grade B up 19% in 1Q 2025. Grade A occupancy reached 98%, while Grade B was similarly high. Similarly, Jeddah saw rising demand and rents, with Prime and Grade A occupancy above 90%, driven by economic diversification and proximity to industrial zones.

On the residential front, Saudi Arabia’s residential mortgage market grew significantly through February 2025, with new loans to individuals up 28.3% y-o-y to SAR 8.9 bn. Apartment lending fueled this surge with a 46.5% rise, signaling a gradual shift from standalone houses, which still account for 62.6% of financing.

MEANWHILE- The retail sector is on the up, with SAR 116 bn in sales in January and February, but a large pipeline of new malls risks oversupply. Major projects like Jawharat Riyadh (120k sqm, completing 2026) and Avenue Mall (370k sqm, completing 2027) will reshape Riyadh’s retail landscape, alongside long-term developments like New Murabba, Qiddiya and Diriyah Gate.

ICYMI- The Real Estate Price Index increased 4.3% y-o-y in 1Q 2025, with residential sector prices rising 5.1%. Key trends included a 5.3% increase in land prices, a 10.3% rise in villa prices, and a modest 1.2% growth in apartment prices. Riyadh saw the largest regional price increase at 10.7%.

Hospitality’s pipeline is busy: Over 426k new hotel rooms are planned to meet growing demand ahead of World Expo 2030 and FIFA World Cup 2034, with private tourism investment reaching SAR 14.2 bn, targeting USD 80 bn by 2030.

Industrial rents rose 14% y-o-y in Riyadh to SAR 206 per sqm per year in 4Q 2024 and 1.8% in Jeddah to SAR 221 per sqm per year. The National Industrial Strategy is driving growth with 105 new licenses in February 2025, 103 new factories launched in January with SAR 900 mn total investment and other major projects like SAL’s SAR 4 bn logistics hub and Modon’s SAR 1.75 bn factory contracts.

BUT- Saudi Arabia’s construction sector is facing challenges from global trade tensions and US tariff wars. These external pressures could lead to short-term increases in the cost of key construction materials, posing potential headwinds for ongoing and future developments.

REMEMBER- The Government has been intervening to ease price pressures in Riyadh, including launching a study on potential rental price caps, finalizing the White Land Tax to encourage housing development, lifting development restrictions on 81.5 sq km of land in northern Riyadh, along with a plan to release 10k-40k affordable residential plots annually through the Royal Commission for Riyadh City.

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