JLL, a leading global real estate consulting and investment firm, revealed that the real estate market in the Kingdom has successfully managed a slowdown in market activity amid the geopolitical and economic uncertainty the region has experienced recently, with clear resilience emerging across several sectors in dealing with these conditions.
According to the firm’s report on the dynamics of the Saudi real estate market’s performance during the first quarter of 2026, despite challenges affecting prices, rental performance, and buyer sentiment, the report reveals that strong government support under Vision 2030 initiatives, continued economic diversification, and regulatory improvements position the Kingdom on a long-term growth trajectory.
The CEO and Head of Capital Markets for JLL in Saudi Arabia commented: “The Saudi real estate market is undergoing a measured evolution. The industrial and logistics sectors are operating at near full capacity, reflecting the Kingdom’s position as a pivotal hub in regional and global supply chains. The cities of Makkah and Madinah continue to support the hospitality sector, as the Umrah season sustains demand for high-quality accommodations. The slowdown in the residential real estate market is seen as a healthy period for market correction and reorganization, paving the way for further sustainable growth. Vision 2030 continues to support the Kingdom’s long-term real estate ambitions across all sectors.”
Office Space Sector
The office space sector in Saudi Arabia showed resilience amid regional uncertainty, driven by Vision 2030 initiatives and the Kingdom’s growing role as a regional business hub. Demand for high-quality office spaces increased during the first quarter, with companies gravitating toward modern spaces with integrated amenities and strategic locations, leading to a divergence in market performance. New and premium office spaces commanded higher rents, while older spaces experienced prolonged vacancies and pricing pressures. As companies prioritize operational flexibility amid changing business conditions, flexible workspaces and serviced offices are gaining momentum by offering scalable options for capacity management and reducing long-term leasing risks.
The report indicated varying rental price performance across the Kingdom. In the capital Riyadh, due to limited supply and strong demand, the premium office space sector maintained exceptional performance despite market conditions, with vacancy rates reaching approximately 3.2% across all categories.
King Abdullah Financial District continued to top rental prices in Riyadh, with premium office rents rising 5.5% year-over-year, while Grade A rents increased by 2.1% and Grade B rents by 5.1%, driven by strong demand and limited supply. In Jeddah, vacancy rates for Grade A office spaces stood at 6%, with rents declining by 3.8% as tenants shifted toward newer properties, while Grade B rents rose by 2.5% as tenants sought a balance between quality and cost. The Dammam metropolitan area saw improvements in vacancy rates for Grade A and B office spaces, reaching 21.4% and 17.3% respectively, with market conditions currently favoring landlords as rents rose by 9.2% and 8.7% respectively, reflecting demand for cost-effective solutions.
Construction activity maintained strong performance, with Riyadh completing 179,400 square meters during the first quarter, and an additional 1.2 million square meters expected to be completed by year-end. While Jeddah saw no project completions in the first quarter, the Dammam metropolitan area is expected to see 129,640 square meters of new supply enter the market, which may tip the balance in favor of tenants in negotiations, potentially leading to a decline in occupancy levels and curbing rental increases as landlords face growing competition in the near term.
Strong Upcoming Supply
The retail sector in Saudi Arabia performed strongly during the first quarter, particularly in Riyadh and Jeddah, driven by continuous population growth and rising consumer spending. Notably, retailers are evolving at an accelerated pace, diversifying their revenue streams by providing interactive activities, expanding food and beverage outlets, and adopting flexible models to meet changing consumer preferences.
Vacancy rates in major regional malls in Riyadh remained stable at 2.1%, while regional and local shopping centers recorded rates of 9.7% and 10.4% respectively. Jeddah followed a similar pattern, with vacancy rates in major regional malls at 7%, while vacancy rates in secondary shopping centers increased. Rental prices showed mixed performance, with major regional malls in Riyadh remaining stable, while rents in regional shopping centers rose by 3.5%, and major regional malls in Jeddah recorded growth of 13%, reflecting a close relationship between asset location and rental prices.
