Jones Lang LaSalle recently outlined its predictions in its ‘Top Trends for Saudi Arabia Real Estate 2011’


TREND


4


Property Management will differentiate the winners from the losers


of property and facility management. With many sectors experiencing a significant increase in supply, the new high value assets will require a higher quality


L property management to


maximise revenues, manage costs, and minimise depreciation. Injections of new supply will tip some markets in favour of tenants, which will require leasing strategies and frameworks that ensure occupancy. Tis trend will be led by large multinational tenants that prefer to lease space managed by professional property management firms. Within facility management, a component of property management, opportunities will emerge to reposition non- performing office and retail assets and, more generally, industry stakeholders will focus on the importance to lifecycle services. Te delivery of world class assets will shift the focus from development to operation and to the protection of the long term value of investment. Due to the nature of the supply pipeline, this trend will first emerge in the office and retail sectors in the short term and in the residential sector in the long term.


ong term capital values will be directly determined by the quality


TREND


5


Light industrial and logistics sectors are on the rise


growth of light industrial and logistics will promote economic growth and increase employment opportunities. In 2011, the focus will shift to more specialist logistics developments and for locations offering multimodal logistics networks integrate air, sea and rail. Tis already extensive sector is still poorly serviced in terms of quality, creating opportunities for high quality modern real estate. Te focus on quality will be supported through investor demand, which is strongest for securely leased, institutional grade product. Although a long term trend, the industrial sector is backed by the emergence of university related research parks that aspire to commercialise academia in order to create a positive feedback loop: developing intellectual property, creating jobs, fostering economic growth, which will ultimately boost demand for industrial real estate.


D


riven by state owned enterprises and buoyed by strong oil prices, the


TREND


6


Growth of middle income, mid-scale residential developments


by micro-developments (less than 5 units), the market will move more to mid-scale planned communities built by professional developers. Since the market will require approximately 900 new homes delivered each day over the next five years, the efficiency realised through centrally planned mid- to large- scale communities is ideal. In terms of market segmentation, high-end demand is largely met and the extensive government initiatives are targeting the affordable housing segment. Tus, the market niche for private developers is primarily


W in mid-scale developments


targeting the middle income housing bracket (SR650,000 - 800,000). Due to the unique family dynamics and larger space requirements of citizens, the target purchase price is approximately SR200 - 250 per square foot, which is best achieved through the economies of scale realised in mid- to large-scale developments.


While


the residential market is supported through the stimulus package and infrastructure investment, delivering homes to citizens and achieving social objectives will require innovative acquisition structures. Although off- plan sales have started, the mortgage law remains a critical factor in expanding homeownership among citizens.


In 2011, the focus will shift to more specialist logistics developments and for locations offering multimodal logistics networks integrate air, sea and rail. Tis already extensive sector is still poorly serviced in terms of quality, creating opportunities for high quality modern real estate


JUNE 2011 I CITYSCAPE I 29


hereas the residential sector was traditionally dominated


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