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LONDON: Government initiatives aimed at developing tourism and encouraging investment are expected to boost the real estate market in Jeddah, according to a report by JLL Mena.
The hotel and office sectors stand to benefit from plans to develop the city’s leisure segment and open the field to foreign investors as part of a wider strategy to broaden the country’s tourism offering and diversify the economy in line with Vision 2030.
“The Saudi Vision 2030 set a clear socioeconomic path and guidelines for the Kingdom which is attractive to investors. The impact so far has been positive on the real estate market with sentiment in some sectors improving,” said Ahmed Almihdar, a senior analyst at JLL Mena.
Large-scale developments, such as the newly announced Red Sea Tourism project have confirmed the government’s commitment to increasing tourism’s contribution to the economy, said the real estate consultancy in its latest quarterly report on the Jeddah property market.
The project, which will transform 50 untouched islands into luxury tourism destinations spanning a 200km stretch of Red sea coastline, is set to add SR15 billion to the Saudi economy.
“Initiatives such as the Red Sea tourism project are important in diversifying Saudi’s economic base away from oil and growing the entertainment and tourism markets.
“The first phase is not expected to complete until 2022, so it has yet to impact the hotel sector. However, it has attracted the attention of a number of international investors and operators,” Almihdar said.
Richard Branson is the first international investor to commit to the project. “This is an incredibly exciting time in the country’s history and I’ve always felt that there’s nothing like getting a firsthand impression,” the Virgin Group owner said last week.
The announcement came amid news that the government will lift the ban on women driving next year, a move that many hailed as symbolic as ��������Ƶ seeks to open its doors to more international trade and tourism.
JLL’s report also pointed to an anticipated increase in demand for commercial space as more global companies eye expansion in the Kingdom following the relaxation of investment regulations and plans to privatize various government holdings. Jeddah currently has around 1 million square meters of office space with a further 51,000 square meters due for completion in the fourth quarter of 2017.
“The ��������Ƶn General Investment Authority has permitted 10 percent foreign ownership of companies in a further three sectors: engineering, education and health care. This represents a further step toward diversifying the Kingdom’s economic base and encouraging foreign direct investment,” the report said.
JP Morgan, Gulf International Bank and Citigroup have all expressed their intention to enter the Saudi market or expand existing operations.
“The government’s drive to increasingly involve the private sector in major social infrastructure projects, is also likely to see increased interest and visits from international investors, advisers and financers,” said Almihdar.
“Jeddah’s prime location between the two Holy cities means it will likely benefit from the increasing number of Hajj and Umrah pilgrims, which is expected to positively impact the hospitality, retail and entertainment sectors in Jeddah,” he added.
Jeddah has historically been the top performer among the key Saudi hospitality markets due to its comparatively diverse demand base. New projects, such as the King Abdul Aziz Airport expansion and Jeddah Economic City are expected to accelerate growth across key market segments, according to a Colliers International quarterly report.
A total of 300 keys were added to the market in the third-quarter, bringing Jeddah’s hotel stock to almost 10,400 rooms. The newly opened Radisson Blu Hotel & Residence Jeddah Al Salam and the Frontel Jeddah will be joined by more hotels scheduled for completion next year with the potential addition of 900 keys by the end of 2018 set to significantly increase the competitiveness of the sector.
The city is also undergoing a leisure-segment overhaul. Plans to attract a broader range of visitors to Jeddah are focused on enhancing the city’s appeal as an entertainment destination, including the renovation of The North Corniche, which will be transformed into a 12 kilometer recreational area with urban parks, an open-air museum, playgrounds and promenade areas.