Interview: Khalid S Aljasser
How will economic diversification impact the growth of real estate projects within and beyond the Kingdom’s main urban centres?
KHALID S ALJASSER: Due to various historical and topographical factors, the Saudi economy is mostly concentrated in dense urban environments. These hubs will continue to be central to the Kingdom’s economic activity for the foreseeable future, fuelled by the innovation and change that is set to be led by the country’s swelling urban youth demographic. However, with advanced technology and national wealth, the benefits of growth are starting to be seen in suburban and rural areas too. The diversification away from oil cannot all take place downtown. Industry, for example, requires wide areas of land available at cheap rates, and this is one example of not just sprawl, but conscious relocation.
On the other side of the economic spectrum, tourism growth will require vast real estate projects in non-urban environments across the country. Simply put, economic diversification will be a boon for the Saudi real estate market, bringing a highly diversified demand for commercial, administrative, residential, retail and other large-scale developments. Saudi Arabia’s population is expected to increase from 32.3m in 2016 to 34.3m by 2019, with approximately 65% of the current population born between 1977-1994, signalling new, favourable social drivers for consumption. The real estate sector is primed to take advantage of the prospects for growth.
What new real estate projects are being targeted to meet future demand for recreational spaces?
ALJASSER: The parameters for entertainment are changing in the Kingdom, and the provision of real estate facilities must keep up with shifting demand. Boosting cultural and recreational spaces is a government priority as entertainment spending by Saudi nationals abroad constitutes a major loss of revenue for the Kingdom. In addition, this new sector would provide related industries with a platform for growth and development, thus increasing employment. Saudi Arabia has an idiosyncratic entertainment culture, and shopping malls will play a strategic part in the development of recreational spaces as demand increases.
Aside from large-scale projects, such as Qiddiya entertainment city and the Red Sea project, there is a large focus on repurposing existing facilities with new attractions to be sanctioned by the government. We develop, own and manage 19 malls in the Kingdom, with an additional three to be opened in 2018 and six more in the pipeline. We have the capabilities to create new recreational spaces in our existing malls featuring facilities such as cinemas and other entertainment hubs reflecting local demand and creation.
How is foreign ownership of retail and wholesale businesses impacting commercial real estate?
ALJASSER: The increase in foreign ownership has resulted in greater competition and increased foreign investment. In its present state, the market is sufficiently mature to withstand international competition, so these measures have come at a good time. In the short term, however, this development will be difficult for less efficient and agile businesses to bear. What the industry really needs now is a greater level of experience and expertise at its disposal.
In broader terms, the commercial real estate market is becoming more competitive. The supply is out there, and so firms and projects, whether domestic or foreign, must increasingly present distinctive features to compete. Foreign ownership is proving to be a catalyst in the change of the type of demand, with increasingly sophisticated and ambitious projects under construction. We also see that increased foreign ownership has had a significant knock-on effect on consumer behaviour. This occurs through the transfer of knowledge, resources, technology and skills development to the Saudi workforce, sparking demand for a greater number of, and newer, leisure and entertainment facilities.
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