Saudi Arabia’s move to encourage multinational companies to set up their regional headquarters in the kingdom will benefit the office sector in the Arab world’s largest economy, according to a report.
The decision is expected to prompt "regional occupiers to review their office footprint across the Middle East and start planning for the long term,” the report by the Kuwait Financial Centre (Markaz) said. "The KSA will undoubtedly benefit from the increased market share of office occupiers in the region."
Last year, Saudi Arabia said it will stop giving contracts to any company that has its regional headquarters outside the kingdom from 2024.
The move was being taken to promote the establishment of local businesses by foreign companies that deal with the kingdom’s government, its agencies and related funds, the Saudi Press Agency reported in February.
Following the decision, 44 multinational companies, including PepsiCo, Baker Hughes, Halliburton, Philips, Schlumberger and Novartis, have relocated their regional headquarters to the kingdom.
“The 44 companies that have announced plans to establish their regional headquarters in Riyadh are expected to bring 67 billion Saudi riyals [$17.86bn] worth of investment to the economy and provide 30,000 job opportunities by 2030,” global consultancy Knight Frank has said in a report.
“Clearly, this suggests that demand for office space is not only being created, but is likely to be sustained, at least in Riyadh.”
Saudi Arabia has plans to finalise a major development strategy for Riyadh this year as it seeks to transform it into a major global city economy by 2030.
The kingdom aims to transform Riyadh into one of the top 10 city economies globally, doubling its population to 15 million to 20 million, while increasing the number of visitors to more than 40 million by 2030, the board of the Royal Commission for Riyadh City said last month.
Close to three million square metres of new office space is also being built in the capital, along with more than 12,000 hotel rooms, spread across mega projects worth an estimated $63bn as the kingdom continues to diversify its economy and increase non-oil revenue, said Knight Frank.
Saudi Arabia's real estate sector is expected to further benefit from favourable government initiatives and mega projects such as Neom, the report from Markaz showed. A rising employment rate and reopening of the economy are expected to positively affect the commercial sector.
Meanwhile, growth in country’s population and changes in mortgage laws will bode well for the residential property sector, the report added.
"Based on our assessment of various macroeconomic factors, we believe that the real estate sector in Saudi Arabia is recovering and gathering pace with a solid outlook for the coming few years."
