Arabia are attracting a lot of international attention from real estate developers and investors, according to the first ever global report into their potential.
They are unique in the region in that they benefit from unconstrained demand from pilgrims visiting the holy sites and from a growing local population, says the report from global real estate consultants Jones Lang LaSalle.
The number of religious tourists could increase from 7.8 million to 13.75 million by 2019 that will lead to opportunities to expand the hospitality market with a total of 82,000 rooms required by then.
There has been a marked surge in interest in Saudi Arabian real estate market in the last few years. Most of this interest has been focused on the largest two cities, Riyadh and Jeddah with Makkah and Madinah being less in the international spotlight, the report says.
But the hospitality markets of these two Holy Cities are unique in benefitting from an effectively unlimited pool of demand. The major constraints on the growth of these markets is, therefore, the ability to accommodate this demand and balance the sometimes conflicting of religious pilgrims and local residents, it points out.
‘While other real estate markets across the Middle East and North Africa (MENA) region have seen a slowdown in both development activity and investment over the past 18 months, Saudi Arabia has remained strong from both local and overseas investors,’ the report adds.
Based on its unique combination of energy driven capital and a large domestic population, Saudi Arabia emerged as the MENA destination of choice among real estate investors responding to Jones Lang LaSalle’s most recent Real Estate Investor Sentiment Survey.
The country of 27 million inhabitants has been experiencing a baby boom in recent years, resulting in a very young and rapidly growing population. There is also a rapid increase in expatriates which now totals 28% of the population with most coming from other Muslim countries.
While restrictions on foreign ownership of property across Saudi Arabia have been relaxed recently, foreigners are still prohibited from owning land in the Holy Cities but this has not constrained involvement with a number becoming major players through joint ventures with Saudi developers.
Major infrastructure developments are being planned including work to airports, train stations and roads. The hotel market is also expected to increase massively. With 7.7 million pilgrims visiting in 2008, the market in Makkah and Madinah have attracted significant interest from both local and overseas investors and developers.
Most of the existing stock of hotel accommodation is not of international quality and there is a clear need to increase this supply.
The most prominent real estate project is Knowledge Economic City five kilometers from the Holy Mosque in Madinah which includes a technology park, a medical centre, business district, a major retail hub, residential units, a convention centre and a hospitality complex.
‘It is poised to uplift the quality of living to international standards,’ the report says. Phase one is currently under construction with villas due to be handed over in 2011.