2024 Report on the Current State of The Real Estate Market in Saudi Arabia and Its Movement Towards by Dr. Mohammed Al Surf

2024

Report on The Current State of The Real Estate Market in Saudi Arabia and Its Movement Towards Carbon Neutrality

BY: DR. MOHAMMED S. AL-SURF SUSTAINABILITY PROFESSIONALS OF SAUDI ARABIA (SPSA)

Disclaimer

This report is prepared for informational purposes only and does not constitute investment advice, or an o6er or solicitation to buy or sell any ﬁnancial instruments or real estate properties. The information contained herein is based on sources believed to be reliable; however, The Sustainability Professionals of Saudi Arabia (SPSA) makes no representations or warranties as to the accuracy or completeness of the information provided.

Readers are advised to conduct their own research and seek professional advice before making any investment decisions or engaging in real estate transactions. The analysis and opinions expressed in this report reﬂect the views of The Sustainability Professionals of Saudi Arabia (SPSA) at the time of publication and are subject to change without notice.

The Sustainability Professionals of Saudi Arabia (SPSA) disclaims any liability for any direct, indirect, or consequential losses arising from the use of this report or reliance on the information contained herein.

Author: Dr. Mohammed S. Al-Surf

Executive Summary

• Saudi Arabia's economic growth is projected to improve in 2024 following a sluggish performance in 2023, driven by strong contributions from both oil and non- oil sectors. Real GDP growth is expected to rise to 4.0% year- on-year in 2024, up from a forecasted 0.8% growth in 2023. While quarterly GDP ﬁgures indicate a downtrend, an increase in demand for oil, moderate inﬂation, and low unemployment rates are anticipated to support economic recovery in 2024. The acceleration of non- oil activities, bolstered by government expenditure, is also expected to continue.

• According to the International Energy Agency (IEA), oil prices are projected to average USD 93 per barrel in 2024, which remains above the International Monetary Fund's (IMF) estimated breakeven price of USD 79.7 per barrel for Saudi Arabia. In June 2023, Saudi Arabia and OPEC+ member nations announced production cuts totaling 3.66 million barrels per day through the end of 2024, along with additional voluntary cuts of 1 million barrels per day extending into 2024.

• Despite rising costs for housing, water, electricity, gas, and other fuels, inﬂation in Saudi Arabia has remained subdued, operating within the 1-3% range. This trend is expected to persist, with the IMF projecting average inﬂation of 2.2% for 2024.

• The ﬁscal outlook for Saudi Arabia is expected to remain stable in 2024, even with oil production cuts, thanks to ongoing government investments and stable oil prices. The consistently strong Purchasing Managers’ Index (PMI) since 2020 highlights the positive impact of government investment on the economy.

• As of September 2023, the value of residential real estate transactions in Saudi Arabia totaled SAR 45.9 billion, representing an 11.3% year- on-year decrease, while the transaction volume fell by 7% year- on-year to 61,473 transactions during the same period. The KSA real estate price index rose by 0.7% year- on-year in Q3 2023, primarily driven by a 1.2% year- on-year increase in residential land prices.

• The performance of the residential sector is declining due to higher mortgage interest rates and persistent property prices. Residential transaction volumes decreased by 20% and 57% year- on-year in Riyadh and Jeddah, respectively, during Q3 2023. However, residential sales prices and rents in the o6ice and retail sectors exhibited positive trends in the same quarter. Demand for residential properties is expected to rebound, especially with government initiatives aimed at increasing homeownership in the Kingdom.

• In contrast, the o6ice sector is performing robustly, particularly in Riyadh, which has seen a rise in both inquiries and closed transactions. In Q3 2023, the average marketwide vacancy rate in Riyadh dropped to 1%. This positive momentum in the o6ice

market is projected to continue into 2024, driven by demand from multinational companies for regional headquarters.

• The Saudi Arabian real estate market remains well-positioned for growth, supported by stable non- oil activity, strong performance in the hospitality sector, and increased government investment in infrastructure projects. However, high interest rates could pose challenges in 2024.

Report on the Current State of the Real Estate Market in Saudi Arabia and Its Movement Towards Carbon Neutrality

Introduction

The real estate market in Saudi Arabia has experienced signiﬁcant transformations over recent years, driven by economic diversiﬁcation e6orts, population growth, and the government's Vision 2030 initiative. As the world shifts toward sustainability, the Saudi real estate sector is increasingly focused on reducing carbon emissions and adopting green building practices. This report explores the current state of the real estate market in Saudi Arabia and its trajectory towards achieving carbon neutrality.

In the coming years, the real estate market in Saudi Arabia is expected to follow an upward trajectory. This growth is primarily driven by economic diversification initiatives outlined in Saudi Vision 2030, along with a rising population, increasing urbanization, and a growing demand for housing. The residential sector stands to benefit significantly from the

government's Housing Program, which is designed to promote homeownership for Saudi citizens. At the same time, the commercial sector is anticipated to expand due to the growth of businesses and the subsequent need for o6ice spaces.

The retail sector is also projected to ﬂourish, supported by higher consumer spending and the development of new malls and shopping complexes. However, the hospitality sector may see a slower growth rate, largely due to ongoing global travel restrictions. Despite this, the expected inﬂux of tourists under the Vision 2030 plan o6ers a positive outlook for the hospitality industry.

Additionally, the real estate market's anticipated growth is bolstered by government e6orts to attract foreign investment. The introduction of Real Estate Investment Traded Funds (REITs) has also made the market more accessible to smaller investors. Collectively, these factors contribute to strong growth projections for the Saudi Arabian real estate market in the years following 2023.

1. Current

State of the Saudi Real Estate Market

1.1 Market Overview

• As of 2024, Saudi Arabia's real estate market has shown signs of recovery following the challenges posed by the COVID-19 pandemic. The sector is supported by rising oil prices, increased government spending, and population growth.

• Major cities like Riyadh, Jeddah, and Dammam are witnessing robust demand for residential, commercial, and mixed-use developments.

• The Saudi government’s commitment to Vision 2030 aims to increase the contribution of the real estate sector to the economy by promoting investments, enhancing regulations, and providing infrastructure.

1.2 Key Trends

• Residential Sector: There is a growing demand for a6ordable housing to accommodate the burgeoning population and expatriate workforce. The government has implemented initiatives such as the Sakani program to facilitate home ownership.

• Commercial Real Estate: The commercial sector is expanding, particularly in retail and o6ice spaces, driven by increasing foreign investment and the development of mega-projects like NEOM and The Red Sea Project.

• Hospitality and Tourism: With an ambitious strategy to boost tourism, there is a surge in hotel and resort developments to accommodate millions of tourists expected to visit Saudi Arabia in the coming years.

1.3 Movement Towards Carbon Neutrality

1. Government Initiatives

• The Saudi government has launched several initiatives aimed at promoting sustainability in real estate. The launch of the Saudi Green Initiative and the Circular Carbon Economy framework are testament to this commitment.

• The country is working towards increasing green buildings and sustainable urban development as part of Vision 2030, which includes ambitious targets for renewable energy installation and environmental sustainability.

2. Adoption of Green Building Practices

• Developers are increasingly integrating green building practices, such as energye6icient designs, water conservation techniques, and the use of sustainable materials to reduce carbon footprints.

• LEED (Leadership in Energy and Environmental Design) certiﬁcation and other environmental standards such as the local rating system “Mostadam” are gaining traction among developers and architects.

3. Investment in Renewable Energy

• Saudi Arabia is investing in renewable energy projects, particularly solar and wind, as a means to power the real estate sector sustainably. This shift aligns with the country’s goals to generate 50% of its energy from renewable sources by 2030.

• The integration of smart city technologies and energy- e6icient systems are being prioritized in new developments, promoting sustainability while enhancing residents’ quality of life.

4. Public-Private Partnerships

• Collaborative e6orts between government entities and private developers are vital for the successful implementation of sustainable projects. These partnerships often involve sharing knowledge, resources, and innovative technologies to improve the overall e6iciency and sustainability of real estate developments.

1.4 Challenges and Considerations

Regulatory and Financial Barriers

• While there are initiatives promoting sustainability, regulatory frameworks may still lag in some areas, hindering the swift adoption of green practices.

• The ﬁnancial implications of implementing sustainable technologies can be a barrier for developers, particularly smaller ﬁrms lacking access to capital.

2. Cultural Acceptance

• Transitioning to a sustainable mindset within the real estate industry requires awareness and commitment from stakeholders, ranging from investors to consumers.

2. Market Segmentation

2.1 Residential Real Estate

2.1.1

Overview

Residential real estate refers to properties designated for non- commercial living purposes, including condominiums, houses, and apartments. In Saudi Arabia, the residential real estate sector is undergoing signiﬁcant changes.

One notable indicator of this transformation is the 13.7% increase in average sale prices observed between 2021 and 2022. This surge reﬂects the optimistic outlook of both investors and end-users in the market, driven by several key factors.

Firstly, government initiatives aimed at enhancing homeownership, particularly among Saudi nationals, have resulted in heightened demand for residential properties. Secondly, the expansion of mortgage ﬁnancing options has facilitated home purchases, leading to an increase in property transactions. Lastly, demographic trends, such as a growing population and increased urbanization, have further intensiﬁed the need for residential accommodations.

It is worth noting that demand varies across di6erent types of residential real estate. There appears to be a growing preference for modern housing solutions that o6er a combination of quality, convenience, and lifestyle amenities. Consequently, properties that align with these changing consumer preferences have been experiencing greater price appreciation. This trend is expected to persist in the coming years, signiﬁcantly inﬂuencing the residential real estate landscape in Saudi Arabia.

2.1.2 Trends & Opportunities

The residential real estate sector in Saudi Arabia is currently experiencing a notable transformation, creating a wealth of trends and opportunities. One key trend is the increasing digitization of the industry, particularly through the rise of proptech, which leverages information technology and platform economics in real estate markets. This digitization is anticipated to foster growth, particularly in the second half of 2023, as advancements in proptech enable smoother property transactions and enhanced management of real estate portfolios.

Another signiﬁcant trend is the adoption of digital rent payment solutions. With the rising demand for contactless and seamless transactions, digital rent payment platforms are

becoming more prevalent. This shift simpliﬁes the payment process and ensures a secure and transparent method of rent collection for property owners, while o6ering tenants convenience and ﬂexibility.

Additionally, the government's Housing Program is creating new opportunities by promoting homeownership among Saudi citizens. This initiative is expected to drive demand for residential properties, positively impacting the sector.

Furthermore, urbanization and a growing population in Saudi Arabia are contributing to the demand for residential real estate, o6ering ample opportunities for developers and investors alike to leverage this growth.

These trends and opportunities are set to signiﬁcantly inﬂuence the residential real estate market in Saudi Arabia in the years ahead.

2.2 Commercial Real Estate

2.2.1

Overview

Commercial real estate encompasses properties primarily used for business purposes, including o6ices, retail centers, warehouses, and mixed-use developments. The performance of this sector is closely linked to the overall economy, as business growth typically drives the demand for commercial spaces.

In Saudi Arabia, the commercial real estate market has experienced a decline, characterized by a notable drop in investment activity. As of May 2023, investments have plummeted by 57% year- over-year, reﬂecting a cautious approach among investors. This decrease can be attributed to various factors, including economic uncertainties and changing business strategies, particularly the increasing preference for ﬂexible work arrangements.

Despite this downturn, certain segments of the commercial real estate market are exhibiting resilience. For instance, the retail sector shows promising potential, buoyed by increased consumer spending and the growth of e- commerce, leading to a heightened demand for warehouses and distribution centers.

Additionally, the o6ice space market is undergoing a transformation, with a growing demand for ﬂexible workspaces that address the evolving needs of businesses. This shift is driving innovation within the commercial real estate sector, as developers and investors experiment with new concepts and formats. However, the overall impact of these changes on the investment landscape remains uncertain.

2.2.2 Trends & Opportunities

The commercial real estate sector, particularly in the industrial segment, plays a vital role in supporting businesses by providing essential spaces for manufacturing, storage, and distribution. Several key factors are shaping the trends and opportunities in this sector in Saudi Arabia.

First, the industrial sector witnessed signiﬁcant rental growth of 10.3% in 2022, indicating strong demand for these properties. This growth is largely driven by the increasing need for warehousing and logistics facilities spurred by the rise of e- commerce and the shift towards online shopping.

Moreover, the government’s promotion of non- oil sectors under Vision 2030 has resulted in heightened demand for commercial spaces from both local and foreign investors, especially in rapidly expanding sectors such as entertainment, tourism, and retail.

The adoption of sustainable practices is another emerging trend within the commercial real estate landscape. Properties that incorporate green building practices and renewable energy solutions are becoming increasingly sought after, providing developers with opportunities to di6erentiate themselves in a competitive market.

Finally, the growing integration of technology and digital platforms is transforming the commercial real estate industry. Technological advancements are o6ering innovative solutions for property management, sales, and leasing, thereby creating new opportunities for market participants.

2.3 Industrial Real Estate

2.3.1

Overview

Industrial real estate refers to land and buildings utilized for industrial activities, including manufacturing, production, and logistics. This category encompasses warehouses, factories, and distribution centers.

In Saudi Arabia, the industrial real estate sector is expected to maintain a strong position in 2023, albeit facing certain challenges. Rising development costs are a signiﬁcant concern, stemming from global supply chain disruptions and increasing prices of raw materials and labor. These factors could lead to higher overall costs for constructing new industrial properties, which may consequently a6ect leasing or purchase prices for tenants.

Despite these hurdles, the demand for industrial spaces is anticipated to remain robust. The surge in e- commerce, accelerated by the pandemic, has resulted in an increased need for warehousing and logistical facilities. Additionally, the government’s emphasis on diversifying the economy away from oil, particularly through support for non- oil sectors such as manufacturing and logistics under Vision 2030, is likely to further stimulate demand in the industrial real estate market.

Furthermore, ongoing urbanization and population growth in Saudi Arabia enhance the positive outlook for this sector. As more people migrate to urban areas, the demand for industrial spaces that support businesses and meet consumer needs is set to increase, making industrial real estate a crucial component of the Saudi economy.

2.3.2 Trends & Opportunities

The industrial real estate market in Saudi Arabia is forecasted to experience signiﬁcant growth in the coming years. A key trend driving this segment is the rise of e- commerce, which is fueling demand for warehouse and distribution center space. This trend, particularly ampliﬁed during the COVID-19 pandemic as consumers increasingly turned to online shopping, is expected to persist, providing developers and investors with opportunities to build and acquire industrial real estate assets to accommodate the growing logistics and distribution needs.

Another notable trend in the industrial sector is the increasing integration of technology in logistics and supply chain management. Advancements in automation, robotics, and data analytics are enhancing operational e6iciency and streamlining processes. A s technological capabilities continue to evolve, demand for modern, technologically advanced industrial spaces is likely to rise.

Additionally, the multifamily segment within the Saudi Arabian real estate market has shown positive signs, with rental growth of 2.5% year- over-year as of 2023. Government initiatives, such as the Housing Program aimed at promoting homeownership among Saudi nationals, are expected to drive demand for residential properties, including apartments and condominiums. This creates further opportunities for developers to invest in residential real estate to meet the rising housing demand.

In summary, the industrial real estate market in Saudi Arabia presents signiﬁcant opportunities for developers and investors, propelled by the growth of e- commerce and increasing technological adoption in logistics and supply chain management. The

multifamily and residential segments also o6er potential for growth, driven by government initiatives and escalating housing demand.

2.4 Retail Real Estate

2.4.1

Overview

Retail real estate encompasses properties designated for retail activities, including shopping malls, department stores, and street-level retail spaces. The retail segment of the real estate market in Saudi Arabia is positioned for steady growth in the coming years, driven by increased consumer spending, rising urbanization, and the expanding e- commerce landscape.

Research indicates that the retail real estate market in Saudi Arabia is projected to grow at a compound annual growth rate (CAGR) of 4.5% during the forecast period, fueled by the demand for modern, highquality retail environments. The popularity of e- commerce is also expected to shape demand for retail spaces that provide unique shopping experiences, such as experiential retail and pop -up shops.

Geographically, the retail real estate market is primarily concentrated in major cities like Riyadh, Jeddah, and Dammam. These urban centers are anticipated to continue attracting substantial investments in the retail sector, spurred by a growing urban population and increasing consumer expenditures.

Shopping malls are expected to remain the dominant form of retail real estate in Saudi Arabia, representing over 60% of the market share. However, there is also a rising demand for street-level retail spaces, particularly in major urban areas.

Overall, the retail real estate market in Saudi Arabia presents signiﬁcant opportunities for investors and developers, driven by the nation's expanding economy and increased consumer spending. Retail developers and investors should focus on creating modern, highquality retail spaces that o6er distinctive shopping experiences to attract and retain customers.

2.4.2

Trends & Opportunities

The retail real estate segment includes properties designed to meet the needs of retailers and service providers, such as shopping malls, strip malls, and standalone stores. As the retail sector in Saudi Arabia evolves, there is a noticeable trend towards the development of

experiential centers—retail spaces that o6er consumers unique experiences beyond traditional shopping, integrating entertainment, dining, and cultural elements.

The integration of technology into retail spaces is another signiﬁcant trend. Retailers are increasingly harnessing technology to enhance the shopping experience through tools such as augmented reality, digital signage, and smart ﬁtting rooms. As a result, retail real estate must adapt to incorporate these technological advancements.

Additionally, the rise of mixed-use developments is emerging as an opportunity in the market. These developments, which combine retail, residential, and commercial spaces, are gaining popularity for their convenience and ability to create vibrant, community- driven environments.

Reflecting positive market sentiment, confidence among residential professionals in the Saudi Arabian real estate market significantly increased from Q4 2022 to Q1 2023. This optimism signals a favorable outlook for the retail real estate sector, driven by the ongoing evolution of retail trends and changing consumer behaviors. Consequently, the retail real estate market is poised to o6er substantial opportunities for investors, developers, and retailers, significantly shaping the future of the Saudi Arabian real estate landscape.

3. Value Chain Analysis

The real estate market in Saudi Arabia is a multifaceted industry comprising various stages in its value chain. This chain begins with land acquisition and development, followed by construction, marketing, sales, and property management. Each stage contributes value to the ﬁnal product and plays a vital role in the overall success of the real estate market.

3.1 Land Acquisition and Development

The ﬁrst stage of the value chain is critical as it establishes the location, size, and type of the real estate project. Developers in Saudi Arabia actively seek prime locations that present high growth potential and proﬁtability. This stage requires comprehensive analysis of market demand, zoning regulations, and the availability of infrastructure.

3.2 Construction

The next phase involves the physical construction of the real estate project. This stage encompasses several sub -processes, including architectural design, engineering, procurement, and construction management. Construction activities in Saudi Arabia are governed by stringent building codes and safety standards, ensuring the quality and safety of the end product.

3.3 Marketing and Sales

Following construction, marketing and sales become essential for the project's success in the marketplace. Real estate developers deploy various marketing strategies to promote their projects and attract potential buyers. These strategies may include advertising, social media campaigns, and promotional events.

3.4 Property Management

The ﬁnal stage of the value chain involves managing and maintaining the real estate asset throughout its lifecycle. Property management activities in Saudi Arabia typically include rent collection, maintenance, repairs, and tenant relations. E6ective property management

is crucial for the long-term success of real estate projects, as it ensures tenant satisfaction and preserves property value.

In conclusion, the real estate market in Saudi Arabia encompasses a complex and dynamic value chain, where each stage adds value and contributes to overall market success. Real estate developers must e6ectively manage each phase of this value chain to maximize proﬁtability and ensure sustainable growth.

4. Market

Forecast 2024-2028

The Saudi Arabian real estate market is anticipated to experience signiﬁcant advancements from 2024 to 2028, particularly with the growing adoption of proptech and digital rent payment systems. These innovations are poised to enhance customer experiences, improve operational e6iciency, and reduce overall costs. The implementation of proptech will enable real estate companies to provide innovative, tailored services, including virtual tours, online property management, and smart home technologies, thereby attracting more customers and fostering loyalty, which can translate into increased sales and revenue.

Additionally, the rise of digital rent payment systems is expected to streamline rent collection processes, minimize late payments, and enhance cash ﬂow for real estate companies. This transition will also beneﬁt tenants by o6ering a convenient and secure payment method without the need for physical checks or cash.

Moreover, there is a growing emphasis on sustainable and eco -friendly properties in the Saudi Arabian real estate market in response to rising environmental concerns. This shift will present opportunities for real estate companies to develop green buildings with sustainable features, such as solar panels, energy- e6icient appliances, and water conservation systems. Such properties will attract environmentally conscious consumers and contribute to the market's overall growth.

The real estate market in Saudi Arabia is poised for signiﬁcant growth and transformation from 2024 to 2028, driven by a combination of favorable economic conditions, government initiatives, and evolving consumer preferences. This forecast outlines the anticipated developments across various sectors of the real estate market, including residential, commercial, industrial, and hospitality segments.

4.1 Economic Overview

The Saudi Arabian economy is expected to maintain a stable growth trajectory between 2024 and 2028, projected to achieve an average annual GDP growth rate of around 4% to 5%. The government's continuous e6orts to diversify the economy away from oil dependency and enhance the private sector's role will create a conducive environment for real estate investments. By leveraging its Vision 2030 framework, the Kingdom aims to catalyze growth in non- oil sectors, which is expected to contribute positively to the real estate market.

4.2 Residential Real Estate Forecast

4.2.1 Demand Drivers

• Home Ownership Initiatives: The government’s ongoing commitment to increasing home ownership among Saudi nationals will drive demand in the residential market. Programs such as the Sakani initiative are expected to facilitate access to a6ordable ﬁnancing, promoting home purchases.

• Population Growth and Urbanization: Saudi Arabia is experiencing rapid urbanization, with more people migrating to urban areas in search of better job opportunities and living conditions. This trend will increase demand for housing, particularly in major cities like Riyadh, Jeddah, and Dammam.

4.2.2 Market Performance

• Price Trends: Residential property prices are projected to grow modestly due to increased demand, but higher interest rates may temper rapid price increases. Average annual appreciation rates for residential properties are expected to hover around 3% to 5% per year.

• Rental Market: The rental market is anticipated to see a steady increase in demand driven by expatriate populations and young professionals. Rent prices are likely to rise, with a forecast increase of approximately 4% to 6% annually.

4.3 Commercial Real Estate Forecast

4.3.1 Sector

Dynamics

• Flexible Workspaces: The demand for co -working and ﬂexible o6ice spaces is expected to continue growing as businesses adapt to hybrid work models. This segment could see an annual growth rate of 7% to 10%, particularly in urban centers.

• Retail Evolution: The retail landscape will evolve with a blend of traditional and experiential retail establishments. As consumers seek unique experiences, developments like shopping malls that incorporate entertainment and dining options will enhance foot tra6ic and sales.

4.3.2 Market Performance

• OLice Space Demand: As multinational corporations set up regional headquarters in major cities, the o6ice market is anticipated to maintain positive momentum, with vacancy rates declining to approximately 1% to 2% in key areas.

• Retail Growth: The retail sector is projected to grow at a compounded annual growth rate (CAGR) of about 5%, supported by rising consumer spending and the integration of e- commerce.

4.4 Industrial Real Estate Forecast

4.4.1 Demand Drivers

• E- commerce and Logistics: The rapid growth of e- commerce is driving demand for logistics and warehousing spaces. This trend will continue as companies seek to streamline their supply chains and enhance distribution networks.

• Government Investment in Infrastructure: The government’s focus on developing transport and logistics infrastructure is expected to bolster the industrial sector.

4.4.2 Market Performance

• Warehouse Space: The industrial real estate segment is likely to grow at a CAGR of 6% to 8% as companies expand their logistics capabilities to meet the demands of ecommerce.

• Manufacturing Facilities: The establishment of new manufacturing plants, partly due to the government's e6ort to promote the local production of goods, will further contribute to the increase in industrial space demand.

4.5 Hospitality Sector Forecast

4.5.1 Tourism Growth

• Increase in International Visitors: Saudi Arabia's e6orts to promote tourism, particularly through events like the Riyadh Season and sporting events, will drive demand for hotel accommodations. With projections estimating a 20% increase in tourism by 2028, the hospitality industry is set for robust growth.

• Investment in Hospitality Infrastructure: The government’s investment in megaprojects such as NEOM and the Red Sea Project will create additional opportunities for hospitality development.

4.5.2 Market Performance

• Hotel Occupancy Rates: Average occupancy rates for hotels are expected to improve, reaching around 70% by 2028, reﬂecting increased tourist inﬂows and domestic travel.

• Room Supply and Demand: New hotel developments will see a steady rise, with growth rates in room supply expected to match tourism growth, yielding a CAGR of 5% for new hospitality projects over the forecast period.

5. The

Importance of International Companies Entering the Saudi

Market

The entry of international companies into the Saudi Arabian market is of paramount importance for the Kingdom’s economic diversification, development, and global competitiveness. Saudi Arabia's Vision 2030 initiative aims to reduce dependence on oil, enhance the private sector's role in the economy, and solidify the Kingdom as a global hub for trade and investment. In this context, the participation of international firms is not only beneficial for local economic growth but is also essential for fostering innovation, knowledge transfer, and enhanced competitiveness.

5.1 Economic Diversiﬁcation and Job Creation

International companies bring investment capital, advanced technologies, and expertise that are crucial for diversifying the economy beyond the oil sector. By establishing operations in Saudi Arabia, these companies contribute to the development of new industries, create jobs, and improve the skill set of the local workforce. For example, the entry of international players in the renewable energy sector has the potential to create thousands of jobs while promoting sustainable development.

Consider the partnership between Saudi Arabia and international ﬁrms like Siemens, which has engaged in projects focused on energy e6iciency and smart infrastructure development. This collaboration not only supports the Kingdom’s goals of generating renewable energy but also paves the way for local talent to gain exposure to advanced technologies and best practices.

5.2 Technological Advancement and Innovation

International companies often bring cutting- edge technology and innovative practices that can signiﬁcantly enhance productivity and e6iciency within various sectors. By integrating global best practices, local ﬁrms can leverage these advancements to improve their operations and service delivery. For instance, international technology giants such as Microsoft and Amazon Web Services have invested in Saudi Arabia by establishing data centers and cloud service o6erings. This move not only caters to the growing demand for digital services but also encourages the local

tech ecosystem to adopt modern solutions, fostering innovation and entrepreneurship in the Kingdom.

5.3 Enhancing Competitiveness

The presence of foreign companies fosters healthy competition within the local market, compelling domestic ﬁrms to improve their standards and o6erings. This competitive environment enhances the overall quality of goods and services available to consumers, driving down prices and increasing choices.

A tangible example is the retail sector, where international brands like IKEA and Starbucks have established their presence in Saudi Arabia. Their entry has not only introduced a broader array of choices for consumers but also encouraged local businesses to adapt and innovate in response to these global players.

5.4 Facilitating Foreign Direct Investment (FDI)

The attraction of international companies facilitates an inﬂux of foreign direct investment (FDI), which is essential for economic growth. FDI provides the capital necessary for infrastructural development, industrial expansion, and the nurturing of new business ventures.

In 2023, Saudi Arabia saw considerable increases in FDI, particularly in sectors such as healthcare, where companies like Bayer and Pﬁzer have partnered with local entities to expand healthcare services and pharmaceuticals in the Kingdom. This not only enhances healthcare delivery but also positions Saudi Arabia as a burgeoning hub for medical research and development in the region.

6. Future Outlook for the Saudi Arabian Real Estate Market (2024-2028)

As Saudi Arabia moves further into the 2020s, the real estate market is poised for a transformative period characterized by both challenges and signiﬁcant opportunities. The Kingdom's commitment to its Vision 2030 initiative serves as a guiding framework aimed at reducing its reliance on oil revenues, fostering economic diversiﬁcation, and enhancing the quality of life for its citizens. This strategic vision is catalyzing a myriad of developments across various sectors, notably real estate.

The next ﬁve years are expected to witness substantial growth and evolution within the real estate market, driven by several key factors. Rapid urbanization, technological advancements, an increasing focus on sustainability, and changing consumer behaviors are reshaping the landscape of residential, commercial, and hospitality properties. Furthermore, the government's proactive measures to attract foreign investment and promote public-private partnerships are expected to enhance the investment climate, making the Kingdom an increasingly attractive destination for both local and international stakeholders.

In this future outlook section, we will explore the anticipated trends and dynamics that are likely to inﬂuence the real estate market in Saudi Arabia from 2024 to 2028. By examining the emerging opportunities alongside potential challenges, stakeholders can better prepare for a robust, innovative, and sustainable real estate environment that aligns with the Kingdom's long-term aspirations.

6.1 Economic Diversiﬁcation:

• Continued emphasis on economic diversiﬁcation will reduce reliance on oil, leading to a broader base for real estate investments across di6erent sectors.

• Government initiatives under Vision 2030 will further drive growth in non- oil sectors, attracting both domestic and foreign investments.

6.2 Growth in E- commerce:

• The ongoing growth of the e- commerce sector will fuel demand for logistics and warehouse spaces, as businesses seek to optimize supply chains and distribution networks.

• Retail layouts will continue to adapt to incorporate both physical and digital shopping experiences, necessitating innovative designs for commercial spaces.

6.3 Increased Urbanization:

• Rapid urbanization in major cities will create sustained demand for housing, particularly in a6ordable and mid-range sectors.

• Mixed-use developments, combining residential, commercial, and recreational facilities, will gain popularity as consumers seek convenience and communityoriented living spaces.

6.4 Sustainability and Smart Technologies:

• A greater focus on sustainability will lead to the construction of eco -friendly buildings equipped with smart technologies that enhance energy e6iciency and environmental performance.

• Government regulations and incentives will support green building practices and renewable energy projects, promoting a sustainable real estate sector.

6.5 Foreign Investment Incentives:

• Continuous improvements in the regulatory environment and investment climate will attract foreign direct investment (FDI) from international companies looking to tap into the Saudi market.

• The simpliﬁcation of ownership laws for expatriates and foreign investors will boost interest in residential and commercial properties.

6.6 Hospitality Sector Boom:

• Signiﬁcant growth in the hospitality sector is expected as international tourism increases, driven by major events, sports tournaments, and cultural initiatives.

• Continued investment in infrastructure projects, such as hotels and resorts, will enhance the Kingdom's appeal as a travel destination.

6.7 Technological Advancements:

• The adoption of proptech solutions, including digital platforms for property management and virtual reality (VR) for property tours, will revolutionize the buying and leasing processes.

• Data analytics will play a crucial role in predictive modeling for market trends, enabling more informed decision-making for developers and investors.

6.8 Potential Headwinds:

• Rising interest rates could a6ect housing a6ordability and dampen consumer purchasing power, leading to ﬂuctuations in residential sales transactions.

• Global economic uncertainties and geopolitical risks may impact investor conﬁdence and the overall growth trajectory of the real estate market.

6.9 Focus on Community Living:

• An increasing emphasis on community- driven developments will shape residential projects, where amenities like parks, communal spaces, and recreational facilities become integral parts of housing developments.

• The desire for enhanced quality of life will make lifestyle- oriented real estate projects more appealing to buyers.

6.10 Regulatory Developments:

• Ongoing reforms and transparency in real estate regulations will foster a more stable and attractive investment environment, helping to build trust with investors and consumers.

• The establishment of real estate investment trusts (REITs) and regulatory frameworks for alternative ﬁnancing options will diversify investment opportunities in the real estate market.

Conclusion

The future outlook for Saudi Arabia’s real estate market indicates a period of dynamic growth and transformation. By capitalizing on economic diversiﬁcation, technological innovation, and shifts in consumer preferences, the sector is poised to thrive. However, stakeholders must remain vigilant to potential challenges and adapt strategies to ensure long-term success in this evolving landscape.

7. Methodology

This section outlines the research methods and approaches utilized to gather data for the analysis of the Saudi Arabian real estate market. The methodology is designed to ensure a comprehensive understanding of market trends, dynamics, and forecasts from 2024 to 2028.

7.1 Research Design

The research employed a mixed-methods approach, combining quantitative and qualitative data collection methods. This design allowed for a multifaceted analysis of the real estate sector, capturing both numerical trends and contextual insights.

7.2 Data Collection Methods

7.2.1 Quantitative

Data

• Market Surveys: Structured surveys were conducted among key stakeholders in the real estate industry, including developers, investors, agents, and property managers. The surveys aimed to gather quantitative data regarding current market conditions, future expectations, and investment intentions.

• Secondary Data Analysis: Data was collected from various credible sources such as:

• Government publications (e.g., Saudi Arabian Monetary Authority, Ministry of Housing).

• Industry reports from reputable organizations (e.g., JLL, Knight Frank, PwC).

• Statistical databases and market research reports that provided insights into economic indicators, property values, and transaction volumes.

7.2.2 Qualitative

Data

• Interviews: Semi-structured interviews were conducted with industry experts, including real estate analysts, economists, and senior executives from real estate ﬁrms. The interviews focused on gathering insights into market trends, challenges, and opportunities in the Saudi real estate landscape.

• Focus Groups: Focus group discussions were organized with representatives from di6erent stakeholder groups to understand diverse perspectives on market dynamics and consumer preferences. This qualitative approach provided a platform for participants to share experiences and expectations regarding the real estate market.

7.3 Data Analysis

7.3.1

Quantitative Analysis

• Statistical Techniques: The quantitative data collected from surveys and secondary sources were analyzed using statistical methods, including descriptive statistics to summarize data, and inferential statistics to identify trends and correlations between di6erent variables.

• Market Modeling: Market trend projections were developed to estimate future price movements, sales volume, and demand across various real estate segments. This involved the use of time-series analysis and forecasting models to predict future market conditions based on historical data.

7.3.2 Qualitative Analysis

• Thematic Analysis: Qualitative data from interviews and focus groups were transcribed and analyzed using thematic analysis. Key themes and patterns were identiﬁed to synthesize insights that reﬂect stakeholder sentiments, challenges, and opportunities in the real estate sector.

• Content Analysis: Reports and published articles were reviewed to contextualize ﬁndings and enrich the analysis. This included examining industry trends, regional developments, and economic factors a6ecting the real estate market.

7.4 Participant Engagement

To gather comprehensive insights on the Saudi Arabian real estate market, a total of 40 professionals participated in the survey, representing a diverse cross-section of the industry. These participants included real estate developers, property managers, investment analysts, and other stakeholders with varying years of experience and expertise. Their responses provided valuable quantitative data regarding current market conditions, trends, and future expectations. Additionally, 20 professionals were engaged in focus group sessions, facilitating in- depth discussions on qualitative aspects of the market. This group comprised individuals in pivotal roles, including architects, ﬁnancial analysts, and legal advisors, each contributing unique perspectives on the challenges and opportunities facing

the real estate sector. The combination of quantitative survey responses and qualitative focus group discussions enriched the analysis and enhanced the overall understanding of the dynamics within the Saudi Arabian real estate market.

7.5 Limitations

While the methodology employed provides a robust framework for understanding the Saudi real estate market, it is important to note certain limitations:

• The availability of comprehensive and up -to - date data can sometimes be a challenge due to the rapidly changing nature of the market.

• The opinions expressed in qualitative interviews reﬂect individual perspectives and may not represent the views of the broader market.

• Market projections are subject to external factors such as geopolitical events, economic ﬂuctuations, and regulatory changes that may a6ect the accuracy of forecasts.

7.5 Conclusion

In summary, this methodology combines a diverse range of data collection and analysis techniques to ensure a comprehensive understanding of the Saudi Arabian real estate market. The insights derived from both quantitative and qualitative measures aim to inform stakeholders about current trends and future outlooks from 2024 to 2028.

8. Conclusion

The real estate market in Saudi Arabia is poised for growth as it adapts to new economic landscapes and international sustainability standards. With strong government support through Vision 2030, coupled with increasing awareness of environmental issues, the movement towards carbon neutrality in the real estate sector is evident. Future developments will likely emphasize innovative designs, clean energy, and e6icient practices, marking a signiﬁcant shift in how real estate is developed and managed in the Kingdom. As the market continues to evolve, stakeholders are encouraged to embrace sustainability as a core tenet of their business models, ensuring a greener future for Saudi Arabia.

The real estate market in Saudi Arabia is on the cusp of signiﬁcant transformation as it moves into 2024, supported by a range of positive economic indicators, government initiatives, and shifting consumer preferences. The interplay of these factors suggests a dynamic environment that will not only adapt to current challenges but also capitalize on emerging opportunities.

8.1 Economic Growth and Stability

The anticipated rebound in Saudi Arabia's GDP growth, projected at 4.0% for 2024, reflects the resilience of both oil and non- oil sectors. The government's commitment to economic diversification, particularly through Vision 2030, continues to bear fruit, fostering an environment conducive to investment and innovation. With the expected stabilization of oil prices and a supportive fiscal landscape, the broader economic context provides a solid foundation for sustainable growth in the real estate sector.

8.2 Shifting Consumer Preferences

As consumer awareness of environmental issues increases, there is a marked shift towards sustainable living in urban developments. The demand for smart and eco -friendly homes is not just a trend; it represents a long-term change in consumer behavior that developers must embrace. Properties that incorporate green technologies and sustainable materials will have a competitive edge as buyers increasingly prioritize energy e6iciency and environmental stewardship. This trend is further supported by governmental policies incentivizing green building practices and promoting sustainability.

8.3 Technological Integration

The growing integration of technology into the real estate market is reshaping how transactions are conducted and properties are managed. Proptech advancements, including virtual tours and digital payment systems, are enhancing the customer experience and operational e6iciency. As these technologies evolve, they will redeﬁne traditional real estate models, making processes smoother and more accessible for both consumers and developers. For instance, technology- driven solutions not only streamline property management but also create opportunities for personalized service o6erings that can build customer loyalty.

8.4 Diverse Opportunities Across Segments

The real estate market is not monolithic; it varies significantly across di6erent segments, each exhibiting unique trends and growth patterns. The residential sector, while experiencing some pressure from rising mortgage rates, is expected to benefit from government initiatives aimed at increasing homeownership. The focus on mixed-use developments reflects a burgeoning consumer preference for integrated living spaces where convenience is paramount.

The commercial sector, particularly in major urban centers, shows strong potential as businesses adapt to new work environments. The demand for ﬂexible o6ice spaces and coworking arrangements has gained momentum, indicating a robust market poised for growth. Additionally, the hospitality sector stands to gain from renewed interest in tourism, with Saudi Arabia's increased focus on attracting international visitors adding further vitality to this area.

8.5 Challenges and Risks

Despite the optimistic outlook, challenges remain. Rising interest rates could continue to exert pressure on a6ordability in the residential market, potentially dampening the speed of recovery in transactions. Furthermore, the commercial real estate landscape must remain agile in response to changing work habits and consumer behaviors post-pandemic. Economic uncertainties, such as global market ﬂuctuations and geopolitical tensions, also pose risks that stakeholders must navigate carefully.

8.6 Conclusionary Outlook

In summary, the Saudi Arabian real estate market in 2024 is characterized by substantial growth potential, driven by economic recovery, technological integration, and evolving consumer preferences. Real estate professionals who adapt to these changes by embracing innovation and sustainability will be well-positioned to thrive in the coming years.

Stakeholders across the spectrum from investors and developers to policymakers must collaborate to navigate the complexities of the market while fostering an environment where both traditional and emerging segments can ﬂourish. As the Kingdom presses forward in its ambitious agenda for economic diversiﬁcation and modernization, the real estate sector will remain an essential pillar of this evolution, ultimately contributing to a resilient and vibrant economy for years to come.

References

- International Monetary Fund (IMF). (2023). World Economic Outlook: Weathering the Storm. Retrieved from www.imf.org

- International Energy Agency (IEA). (2023). Oil Market Report. Retrieved from www.iea.org

- Saudi Arabia Vision 2030. (2016). Vision 2030 Kingdom of Saudi Arabia. Retrieved from www.vision2030.gov.sa

- Saudi Arabian Monetary Authority (SAMA). (2023). Economic Reports and Data. Retrieved from www.sama.gov.sa

- PwC. (2023). Real Estate and Hospitality Insights: Saudi Arabia Market Review. Retrieved from www.pwc.com

- JLL (Jones Lang LaSalle). (2023). Saudi Arabia Real Estate Market Overview. Retrieved from www.jll.com

- Knight Frank. (2023). Middle East Residential Market Update. Retrieved from www.knightfrank.com

- Al-Hokair Group. (2023). Investing in Saudi Arabia’s Hospitality Sector. Retrieved from www.alhokair.com

- McKinsey & Company. (2023). Saudi Arabia’s Economic Transformation: The Role of Technology and Innovation. Retrieved from www.mckinsey.com

- Gulf Research Center. (2023). The Future of Urban Development in the Gulf Region. Retrieved from www.gulfresearchcenter.org

- The Urban Future Summit - https://www.urbanfuturesummit.com/

- The Real Estate Development Symposium - https://redsa.org/symposium/

- The Real Estate Investment Exhibition - http://www.reexsaudi.com/

- Saudi Contractors Authority - https://sca.gov.sa/

- Real Estate Development Fund - https://www.ref.gov.sa/

- General Authority of Zakat and Tax - https://gazt.gov.sa/

- Saudi Arabian Monetary Authority - https://www.sama.gov.sa/

- Real Estate Development Chamber - https://www.chamber.org.sa/

- Ministry of Housing Saudi Arabia - https://www.housing.gov.sa/

- Saudi Arabian General Investment Authority - https://sagia.gov.sa/

- Saudi Real Estate Institute - https://srei.gov.sa/

- Saudi Council of Engineers - https://www.saudieng.sa/

2024 Report on The Current State of The Real Estate Market in Saudi Arabia and Its Movement Towards Carbon Neutrality

- Saudi Building Code National Committee - https://www.sbcncsa.org/

- Cityscape Saudi Arabia - https://www.cityscapeglobal.com/saudiarabia/

- The Big 5 Saudi - https://www.thebig5saudi.com/

- Al Habtoor Group. (2023). The Evolving Landscape of Real Estate in Saudi Arabia. Retrieved from www.habtoor.com

- Brookings Institution. (2023). Saudi Arabia: Economic Diversiﬁcation and the Future of Oil. Retrieved from www.brookings.edu

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- KPMG. (2023). Saudi Arabia’s Real Estate Sector: Opportunities and Challenges. Retrieved from home.kpmg

- Colliers International. (2023). Saudi Arabia Property Market Snapshot. Retrieved from www.colliers.com

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- Saudi Bureau of Statistics. (2023). Statistical Yearbook 2023. Retrieved from www.stats.gov.sa

Appendix A: Saudi Arabian Real Estate Market Survey

Introduction:Thank you for participating in the Saudi Arabian Real Estate Market Survey. Your insights are invaluable and will help us better understand the current trends and future outlook of the market. This survey is anonymous, and all responses will be kept conﬁdential.

Section 1: Respondent Information

1. Name (optional): _______________________

2. Position/Title: _______________________

3. Company/Organization: _______________________

Years of Experience in the Real Estate Sector:

o 0-2 years

o 3-5 years

o 6-10 years

o 11+ years

Primary Sector of Involvement (Select all that apply):

o Residential

o Commercial

o Industrial

o Hospitality

o Retail

o Other: _______________

Section 2: Current Market Conditions

How would you rate the current state of the Saudi real estate market?

o Very Poor

o Poor

o Fair

o Good

o Very Good

What do you believe to be the main drivers of the real estate market currently? (Select all that apply)

o Economic growth

o Government policies

o Foreign investment

o Urbanization

o Changing consumer preferences

o Other: _______________

What challenges are you currently facing in the real estate market? (Select all that apply)

o High construction costs

o Regulatory hurdles

o Economic uncertainty

o Limited access to ﬁnancing

o Changing demand trends

o Other: _______________

Section 3: Future Expectations

What is your outlook for the Saudi real estate market over the next ﬁve years?

o Very Negative

o Negative

o Neutral

o Positive

o Very Positive

Which real estate segment do you expect to see the most growth in over the next ﬁve years?

o Residential

o Commercial

o Industrial

o Hospitality

o Retail

What factors do you believe will drive growth in the real estate market in the coming years? (Select all that apply)

o Continued government investment

o Increased foreign direct investment

o Population growth

o Infrastructure development

o Technological advancements

o Other:

Section 4: Investment Intentions

Are you planning to invest in real estate in the next 1-2 years?

o Yes

o No

o Unsure

If yes, which segment are you most likely to invest in?

o Residential

o Commercial

o Industrial

o Hospitality

o Other:

What is your primary reason for investing in real estate?

o Capital appreciation

o Rental income

o Diversiﬁcation of investment portfolio

o Long-term security

o Other: _______________

Section 5: Additional Comments

Please share any additional comments or insights regarding the Saudi Arabian real estate market:

Thank You!

Thank you for taking the time to complete this survey. Your input is greatly appreciated and will contribute to a better understanding of the Saudi Arabian real estate market. If you have any further questions or wish to receive a summary of the ﬁndings, please provide your email address below (optional):Email: _______________________

Appendix B: Saudi Arabian Real Estate Market Focus

Group Questions

General Questions

1. Introductions:

• Can each participant brieﬂy introduce themselves and share their role in the real estate sector?

2. Market Overview:

• How do you perceive the current state of the Saudi real estate market? What are some strengths and weaknesses?

Current Trends and Challenges

1. Current Trends:

• What current trends are you observing in the Saudi real estate market? How are these trends impacting your business or investment strategies?

2. Consumer Preferences:

• How have consumer preferences changed over the past few years? What do you believe are the key factors driving these changes?

3. Challenges:

• What are the most signiﬁcant challenges you face in the real estate market today? How are these challenges a6ecting your operations or investment decisions?

Future Outlook

1. Future Expectations:

• What are your expectations for the Saudi real estate market over the next ﬁve years? What factors will drive growth or cause potential downturns?

2. Emerging Opportunities:

• Where do you see the most signiﬁcant opportunities within the real estate market? Are there speciﬁc segments (e.g., residential, commercial, hospitality) that you believe will thrive?

3. Impact of Government Initiatives:

• How do you perceive the government’s initiatives under Vision 2030? What impact do you expect these initiatives to have on the real estate market?

Investment Strategies

1. Investment Trends:

• What investment strategies are you adopting in light of the current market conditions? Are you considering new opportunities or diversifying your portfolio?

2. Role of Technology:

• How is technology shaping the real estate sector? Are there any speciﬁc technological trends you believe will play a crucial role in the market's future?

Collaboration and Networking

1. Collaboration:

• How can di6erent stakeholders (developers, investors, government, and consumers) work together to strengthen the real estate market? What role do partnerships play in driving success?

2. Networking Opportunities:

• What kinds of events or platforms do you believe would foster better collaboration within the real estate sector? How can industry professionals beneﬁt from networking?

Closing Thoughts

1. Final Thoughts:

• In conclusion, what key messages or insights would you like to share regarding the Saudi Arabian real estate market that we haven’t covered?

2. Open Discussion:

• Do any participants have further comments, questions, or topics they would like to discuss related to the real estate market?