Office rents in Riyadh, the energetic capital of Saudi Arabia, are skyrocketing. By the end of the first quarter of 2025, Grade A office space prices will have increased by 23% year over year to a record high of SAR 2,700 ($719.95) per square meter. Due in large part to Saudi Arabia’s aggressive economic reforms and alluring government incentives, more than 600 multinational corporations have announced plans to locate their regional headquarters in the city, contributing to this dramatic increase.
Booming Office Market
With Grade A office occupancy rates reaching 98% and Grade B office occupancy rates at 97%, Riyadh’s demand for office space has escalated to previously unheard-of levels. To maintain 95% occupancy by March 2025, Grade A office rents in Jeddah, another significant economic centre, have increased by 4% to SAR 1,280 per square meter, while Grade B office rents have increased by 6% to SAR 845 per square meter. The kingdom’s increasing popularity as a business destination is reflected in this high demand.
“Saudi Arabia’s economic momentum continued to strengthen across key sectors in 2024, underpinned by rising private sector activity,” said Faisal Durrani, Partner and Head of Research MENA at Knight Frank. The highest annual number on record, 14,303 foreign business investment licenses, was granted in 2024—a 67% increase from 2023, highlighting Saudi Arabia’s ongoing appeal to international corporations and investors.
Government Initiatives Driving Growth
Saudi Arabia’s Vision 2030, a strategic plan to diversify the economy away from reliance on oil, is closely linked to the rise in office rents. A key component of this vision is the Regional Headquarters Programme, which offers companies a 30-year tax relief package, including 0% corporate income tax and 0% withholding tax on approved regional headquarters activities, as well as additional benefits such as discounts and support services. By February 2025, around 600 companies had announced plans to establish their regional headquarters in Riyadh, significantly increasing demand for prime office space. Additionally, the issuance of 14,303 foreign business investment licences in 2024, a 67% increase from the previous year, highlights the kingdom’s growing attractiveness to global investors.
Construction Sector in High Gear
A significant amount of activity is being driven by the influx of businesses in the construction sector. To meet the increasing demand, developers in Riyadh intend to construct 2.7 million square meters of new office space over the course of the next two years. It is anticipated that Jeddah’s office stock will grow from 1.6 million square meters in 2024 to 1.8 million square meters in 2027. Important projects consist of:
- Jeddah Gate: A development expected to deliver 230,000 square meters of office space between 2025 and 2028.
- Jeddah Rose: A mixed-use project set to bring 25,000 square meters of office space by the end of 2025.
As more businesses spread their operations throughout Saudi Arabia, Jeddah is drawing an increasing number of regional and local businesses, according to James Hodgetts, Partner-Occupier Strategy & Solutions at Knight Frank. There is a robust office development pipeline supporting this growing interest.
In line with Saudi Arabia’s drive for digitalisation, the data centre market is likewise expanding quickly. Amazon Web Services (AWS) has pledged $5.3 billion for cloud services infrastructure, while Alfanar Global Development has announced an investment of $1.4 billion for four data centres. As the nation continues its push towards national digitalisation, Saudi Arabia is currently the data centre market with the fastest rate of growth, according to Stephen Beard, Global Head of Data Centres at Knight Frank. A major factor in the Kingdom’s data centre infrastructure development has been the use of public clouds and ongoing public and private investment, making it one of the top five AI superpowers in the world, as demonstrated by the $100 billion Transcendence AI Initiative that was just launched.
Hospitality and Tourism Growth
In addition to office space, the kingdom’s expanding tourism industry is driving a lot of activity in the hospitality sector, especially in Makkah and Madinah. By 2027, Makkah’s inventory will have grown from 63,428 to 71,643 hotel rooms thanks to the addition of 8,500 rooms spread across 12 developments. In Madinah, 2,100 hotel rooms are currently being built, and an additional 47,000 rooms are planned as part of the Rua Al-Madinah project. “These latest figures point to resilient demand amid limited new supply and further highlight Madinah’s pricing strength,” said Amar Hussain, Associate Partner – Research, Middle East at Knight Frank, highlighting the demand. The city is predicted to see 30 million pilgrims by 2030, up from 17.3 million in 2025, demonstrating its expanding status as a major religious tourism destination worldwide.
Future Outlook
Saudi Arabia has emerged as a major business hub in the Middle East, as evidenced by the rise in office rents and the arrival of multinational corporations. Global companies are expected to continue to be drawn to the government’s strategic initiatives, like the Regional Headquarters Programme and Special Economic Zones, which will maintain the demand for commercial real estate. With new office buildings, data centres, and hospitality projects slated to transform the kingdom’s urban landscape, the construction industry is expected to experience steady growth.
Key Construction Projects and Investments
| Project/Investment | Location | Details | Timeline | Investment |
| New Office Space | Riyadh | 2.7 million sqm of new office space | Next 2 years | Not specified |
| Jeddah Gate | Jeddah | 230,000 sqm of office space | 2025–2028 | Not specified |
| Jeddah Rose | Jeddah | 25,000 sqm of office space | By end of 2025 | Not specified |
| Alfanar Data Centers | Saudi Arabia | Four data centers | Not specified | $1.4 billion |
| AWS Cloud Services | Saudi Arabia | Cloud services infrastructure | Not specified | $5.3 billion |
| Makkah Hotel Developments | Makkah | 8,500 hotel rooms across 12 developments | By 2027 | Not specified |
| Madinah Hotel Developments | Madinah | 2,100 hotel rooms, plus 47,000 planned | By 2027 | Not specified |
Saudi Arabia’s economic transformation, driven by Vision 2030, is reshaping its commercial real estate and construction sectors. The unprecedented demand for office space in Riyadh, fueled by over 600 companies planning regional headquarters, is creating opportunities for developers and investors. With significant projects in the pipeline and continued government support, the kingdom is well-positioned to solidify its status as a global economic powerhouse.
