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 published in January by the Kuwait Financial Centre (Markaz).
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 KSA will undoubtedly benefit from the increased market share of office occupiers in the region,” said the report.
Last year the Saudi government announced that, from 2024, it will stop giving contracts to any company that has its Middle East regional headquarters outside the Kingdom. The move is intended to promote the establishment of local businesses by foreign companies that deal with the Saudi government, its agencies and related funds.
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 SAR67 billion (USD17.86bn) worth of investment to the economy and provide 30,000 job opportunities by 2030,” according to a report by global real estate consultancy Knight Frank. “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 propel 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, said the Royal Commission for Riyadh City.
Close to three million sq m 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 USD63 billion 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 the futuristic metropolis of Neom, said the Markaz report. A rising employment rate and reopening of the economy are expected to positively affect the commercial sector.