Measured growth and market repositioning will define Saudi Arabia’s real estate sector in the first quarter of 2026 | News
CBRE Middle East, a global leader in commercial real estate, today published its Saudi Arabia Real Estate Market Review for the first quarter of 2026, highlighting a market defined by strategic recalibration, steady structural demand factors and continued investor confidence, despite a more complex regional economic backdrop.
Saudi Arabia’s macroeconomic environment in early 2026 reflects a period of adjustment shaped by external pressures and evolving domestic policies. Real GDP growth fell to 2.8% annualized in the first quarter, with full-year expectations for 2026 revised down to 1.9%, reflecting significant reductions in oil production and exports and softer expansion of the non-oil sector.
Inflation remains stable at 1.8%, while foreign direct investment saw a strong boost, rising 90% year-on-year in the fourth quarter of 2025, signaling confidence in the Kingdom’s long-term prospects. Fiscal policy remains expansionary and supports major infrastructure investments in addition to ongoing capital market reforms aimed at improving liquidity and investor access. Against this backdrop, the real estate sector continues to show strength. Transaction values reached SAR 112 billion in the first quarter of 2026, up 6.8% year-on-year, supported by improved financing conditions and better access to capital. At the same time, regulatory reforms, including foreign ownership measures and greater market transparency, are strengthening institutional participation and aligning the sector with global standards.
The development pipeline is also evolving, with a gradual shift from construction-led growth to delivery and long-term asset management. Major projects continue to develop, with Riyadh remaining the center of activity. Strategic repositioning is evident in key developments, including NEOM’s growing focus on AI and data infrastructure, alongside continued progress in projects such as Diriyah and Jeddah Tower. This sustainable pipeline, supported by public and private investments, strengthens the long-term ambitions of the Kingdom’s Vision 2030.
The office market remains fundamentally undersupplied, especially for prime spaces, with Class A occupancy rates remaining close to full capacity. Demand continues to be driven by the Regional Headquarters (RHQ) programme, which attracts hundreds of international companies to establish a physical office presence in the capital. Although new supply is expected to moderate rental growth in the longer term, structural demand remains greater than supply. In other markets, such as Jeddah and Dammam, office performance remains stable, although a clear divide is emerging between modern A-class assets and older stocks, with occupiers increasingly prioritizing quality, flexibility and digital infrastructure.
The housing sector continues to see robust activity, supported by a growing population, government-backed housing initiatives and growing mortgage penetration. However, the continued supply deliveries in the major cities contribute to a more balanced market environment. Accordingly, residential rental prices in Riyadh fell by 2.1% year-on-year in March 2026, marking a shift towards more sustainable prices in the capital. This softening underlines the impact of the September 2025 regulatory review (5-year rent freeze), which ended the cycle of sustained rental growth. Under REGA’s new mandate, rents for existing leases will be set at September 2025 levels, while newly marketed inventory must match the last recorded value on the Ejar platform. This regulatory shift provides a stabilized foundation for both existing leases and new inventory, effectively cooling speculative peaks.
The retail sector continues to show a clear shift towards digital commerce, a trend further accentuated by recent events, impacting consumer movements and spending trends. Electronic payments will account for 85% of total retail payments by 2025, demonstrating accelerated digital adoption. Domestic consumption, especially in F&B and fashion, remains strong and helps stabilize the sector, offsetting fluctuations in international tourism. New retail offerings are increasingly being integrated into mixed-use masterplans, with developers prioritizing F&B outlets as key footfall destinations. Major projects such as The Avenues Riyadh, Westfield Jeddah and Westfield Riyadh will open soon, creating significantly more space. Despite market shifts, rents for super-regional and regional shopping centers have remained stable, with landlords generally maintaining rates and not offering concessions on a large scale. The focus for successful shopping centers is now on creating walkable, community-oriented spaces that prioritize wellness, luxury and digital amenities.
The performance of the hospitality market reflects the impact of restrictions on international leisure movements and regional business travel, with a decline in occupancy and RevPAR year-to-date (YTD) compared to the first quarter of last year. The biggest impact was felt in Riyadh and Damman, although Jeddah and Makkah remain in positive territory in all metrics YTD, reflecting the positive impact of religious tourism demand. However, amid continued government support, the future supply pipeline continues to grow, with thousands of new keys under development in primary and secondary cities, with the hospitality sector remaining a central pillar in Saudi Arabia’s ambition to attract 150 million visitors annually by 2030.
Industrial and logistics continues to develop as an important pillar of economic diversification. Demand for high-quality warehouses remains strong despite supply constraints, driving rental growth in major hubs such as Riyadh and Jeddah. Strategic infrastructure projects, including logistics corridors and integrated supply chain developments, further strengthen the Kingdom’s position as a regional trade and distribution hub. Despite operational challenges associated with global supply chain disruptions, long-term fundamentals remain very positive, supported by e-commerce growth and industrial expansion.
Matthew Green, head of research at CBRE MENA, comments: “Saudi Arabia’s real estate landscape continues to evolve at a rapid pace, responding to recent regulatory changes and shifting demand patterns, resulting in a growing divergence in performance at a sector level.”
