Outlook of Compounds in KSA Changing Composition
The Impact of current market conditions on lease rates, overall occupancy rates, and the sector’s structure.
Saudi Arabia, Riyadh, 2 May, 2017
– Colliers International, The Global Commercial Real Estate Leader, released its latest white paper focusing on the Residential Compound sector in the Kingdom of Saudi Arabia. Whilst examining current market supply, demand drivers and sector performance, the report concludes with expected structural changes and their implications.
A long-time staple of the Saudi Real Estate, the compound concept was introduced to KSA with the arrival of expatriates to the Kingdom. Those employees were divided into three groups; Labor, Semi- skilled and Management levels; the white paper focuses on the third segment.
Whilst considering Macro drivers such as the expat population, land availability, price and including the Micro drivers of community, facilities, amenities and security, the report also sets out Colliers categorisation of the compounds into A and B grades. The Colliers grading system criteria is based on some elements such as Community, Services, Security and Innovation.
Commenting on the market condition and potential structural changes, Imad Damrah, Managing Director of Colliers International in Saudi Arabia, said: “we observed a decrease in lease rates during the year 2016 due to current economic conditions, a decreased occupancy (approximately 75% for compounds in Riyadh, 90% in Jeddah and 92% in Dammam/Al Khobar), and shifting bargaining power from owners/developers to tenants”
He added, “the changes in the Saudi economy have definitely influenced the compound sector. Investors and owners need, in light of the new market realities, to assess their market positioning with adaption, reconfiguration and realignment critical to the ongoing success of their portfolios”