Riyadh has emerged as the undisputed leader in Saudi Arabia's retail space growth, boasting an impressive 90% occupancy rate. According to Knight Frank's Summer 2024 Saudi Arabia Retail Market Overview, the capital city has witnessed a 5 percentage point surge in occupancy rates over the past year, accompanied by a 3% increase in average rental rates for regional and super-regional malls to SAR2, 725 per square meter.
The city's existing retail space, totaling 3. 6 million square meters, received a boost with an additional 27, 050 square meters added in the first quarter of 2024. This growth is further fueled by mega-projects aimed at accommodating the kingdom's projected population increase to 40 million and attracting 150 million foreign visitors by 2030. These projects alone will contribute over 5. 3 million square meters of retail space to Riyadh.
While Riyadh thrives, Jeddah and Dammam have witnessed contrasting trends. Both cities experienced a decline in occupancy rates by 1 percentage point, with Jeddah's average rents dropping by 7% to SAR2, 465 per square meter and Dammam's witnessing a 1. 3% decrease to SAR2, 275 per square meter.
Despite Riyadh's robust growth, experts advise mall operators, developers, and retailers to focus on experiential retail offerings to maintain their appeal in a market expected to see an additional 100, 000 square meters of space completed this year.