Boston, MA -- (SBWIRE) -- 04/14/2014 -- We believe that the real estate sector in Saudi Arabia will remain generally stable in 2014 with the potential for small growth of rental rates in Jeddah and a slight decrease for office rates in Riyadh. We believe that net yields will remain consistent, and that no significant change will come to this market while it is such a state of oversupply.

Saudi Arabia's various real estate sectors are developing in different directions and at varying rates. The commercial market in general suffers from oversupply and is forecast to undergo limited growth in the short term; our in-country sources and latest data collection do not contradict this long-held view in light of the dynamic supply pipeline. Of the three sub-sectors that we survey there are pockets of growth opportunity, particularly in the retail and industrial segment.

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Recent Developments:

- Riyadh, the capital and largest city of Saudi Arabia, recorded more than SAR99bn (US$26.40bn) in commercial and residential real estate transactions in 2013, making it the most sought-after city in the kingdom, according to the real estate index issued by the Ministry of Justice. The rise has been attributed to the positive impact of the economic and social stability witnessed in Saudi Arabia in 2013. The index registered more than 43,476 real estate transactions in Riyadh city covering a total area of 227m2. Jeddah came second with more than SAR50.6bn (US$13.49bn) in residential transactions and SAR39.9bn (US $10.64bn) in commercial transactions during the year.
- A member of the real estate committee at the Eastern Province Chamber of Commerce and Industry in Saudi Arabia has said the province will attract real estate investments worth more than SAR100bn (US $26.66bn) in the next five years, reports Al-Riyadh daily. Abdullah Al-Sulaiman also noted that the Saudi real estate market is undergoing radical changes and needs modern approaches and non-traditional products to gain momentum.

Key BMI forecasts

- Rental rates in Riyadh will remain static in the retail and industrial sector in 2014, but are predicted to drop by 3% in the office sector due to extreme oversupply
- Rental rates in Jeddah will increase by 5% in all sectors: office, retail, and industrial
- Net yields will remain static in both Riyadh and Jeddah in all three sectors.

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