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MAKKAH – Government initiatives have increased the number of pilgrims traveling to the holy city of Mecca, which has had a positive effect on all areas of the city's real estate – according to the survey of the city. 2019 first half market of Mecca, the real estate consulting firm CBRE.
Residential
Mecca has reported growth in residential subdivisions across the city. This trend is particularly marked in projects such as Aali Makkah. There has also been an increase in the number of residential neighborhoods in the city, such as the Tilal Al Naseem Complex and Al Awali Hill, following concerns about the shortage of affordable housing in the city. In the short term, residential demand will continue to focus on small units. In addition, unplanned settlements are being redeveloped to improve the quality of life and stimulate demand in this particular area. CBRE's market snapshot also reveals that secondary housing buyers and investors continue to acquire units in the larger city of Mecca.
Hospitality
International operators are increasingly contributing to major master plans, including Jabal Omar Development and King Abdul-Aziz Road Development. Hotel operators continue to offer special promotions and packages to businesses in Haj and Umrah, in line with government plans to increase the number of religious tourists visiting the Kingdom to 30 million per year by 2025 CBRE has reported a significant shift towards higher quality hotel developments with improved services and facilities and serviced apartments, as part of larger plans to diversify accommodation offerings for religious tourists. In addition, investors continue to develop their properties in order to attract international operators. Close cooperation between the public and private sectors has played a major role in stimulating the city's hospitality sector, with positive effects on segments such as retail and leisure. With the increase in the number of visitors, hotels in Mecca should continue to generate positive growth in the number of occupants, with an impressive 15% increase since the beginning of the year. In total, more than 21,485 keys are currently under construction in the city.
Retail
According to the CBRE report, retail demand in Makkah remains heavily oriented towards higher quality retail destinations as shopping centers continue to post high occupancy rates. The restaurant business continues to perform well, particularly in outlets in the Al Awali, Rusifah and Al Khalidiyah areas. There must be a good supply of commercial developments on the market, with 0.1 million GLA expected to be delivered by 2022. Although mainly neighborhood and community developments, they should also meet the pilgrims and the inhabitants of the city.
Rental rates in the retail sector declined, with a 1% year-on-year decline for regional shopping centers, according to the CBRE market snapshot. However, the launch of a number of museums and heritage sites should not only improve the quality of life, but also stimulate more the city's booming sector.
Office
Mecca's commercial retail sector is dominated by government entities and hajj firms. According to CBRE, as the number of pilgrims from Haj and Umrah continues to grow, new businesses are expected to enter the market, which will result in increased demand for office space. The upcoming supply on the market will likely be in the form of commercial grade B developments.
The total number of offices in Mecca currently stands at 284,000 sqm gross leasable area (GFS) in the first half of 2019, and an additional 44,160 sqm is expected to be delivered by 2022.
Despite the positive long-term outlook, rental performance continued to experience tensions in both the main and secondary offices, with rental rates down 10% and 11% respectively compared to the previous year.
Simon Townsend, Managing Director of CBRE KSA, commented on the report: "Mecca is currently experiencing growth in several key real estate sectors. This trend stems directly from the ambitious vision of the Saudi government and its intention to significantly increase the number of religious tourists visiting the Kingdom each year. Mecca continues to grow in importance as a real estate market and, as the redevelopment of the city continues, we can expect to see a number of large-scale projects in key segments come to fruition.
"Government initiatives are expected to have a positive impact on the hospitality and retail sectors, while the increase in the number of visitors will have a positive impact on local businesses that are growing. occupy religious tourism. It will be interesting to see how the infrastructure and transport segments are reorganized in response to the increasing number of visitors. Mecca is a rapidly evolving city, and it is important for the public and private sectors to work together effectively to keep the real estate sector going with the needs of a changing marketplace. "-SG
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