Real estate sector showing signs of positivity as Public Investment Fund announces latest mega project in Makkah
Makkah, Kingdom of Saudi Arabia –11 July, 2018- The latest mega project in Makkah ‘Rou’a Al Haram Al Makki, announced late last year by the Public Investment Fund, will play a significant role in boosting Makkah’s economic growth and in turn, enhancing the overall sentiment in the Makkah real estate market, according to JLL’s H1 2018 Makkah marketplace report launched today.
The government is now implementing different projects within the Saudi Vision 2030. The new project in Makkah is expected to contribute SAR 8 billion (USD 2.1 billion) to the national economy. Construction is expected to commence later this year, paving the way to increase the city’s ability to host 30 million pilgrims annually in line with the government policy of lifting the quota on Hajj pilgrims, introduced in H1 2017. With the influx of pilgrims, there will be an expected increase in investment opportunities across all sectors of the real estate market.
“With the latest mega project being announced late last year, the Makkah market is likely to witness increased investment across all real estate sectors over the rest of 2018 and beyond,” said Craig Plumb, Head of Research, MENA at JLL.
“The government is rapidly introducing policies and promoting additional investment across the entire Kingdom, to diversify the economy and increase the rate of economic growth. Makkah remains central to attracting Hajj and Umrah visitors and will benefit from the mega project that will also encourage other key stakeholders to invest across all real estate sectors. This new investment will be a particular boost in sentiment towards the hospitality and retail sectors,” he added.
The first Makkah Economic Forum held in May, unveiled eight investment opportunities in the Hajj and Umrah sector in the office market, with a value of approximately SAR 600 million (USD 160 million) across the two Holy cities of Madinah and Makkah. The Ministry of Hajj and Umrah is also encouraging SMEs to invest in companies offering Umrah services to further improve the corporate sector’s performance.
Whilst residential rents and sales prices softened further in H1 2018, further down the line, Makkah should experience a continued increase in prices as new projects enter the market. The new mega project could potentially add a further 9,000 residential units to Makkah’s supply pipeline and this is just one example which is currently in the early phases of development.
F&B is becoming an increasingly important sector of the retail market in Makkah, as a number of recently completed plazas offering quality international restaurants and food outlets have been opened across the city. Citywide vacancies declined marginally by around 2% over the past 12 months to reach 4%. The ‘Rou’a Al Haram Al Makki’ project will further enhance the sector to support the project’s 310,000 visitor capacity.
The hotel sector is due to witness a surge in supply as 70,000 hotel rooms are planned as part of the ‘Rou’a Al Haram Al Makki development. With other projects already under construction or announced, the supply of quality hotel rooms could increase considerably by 2030. There were a number of completions in the hotel sector in H1 2018 and further openings are expected in the second half of the year.