Riyadh City Profile – December 2010 on . point The Riyadh real estate market continues to experience rapid growth due to: • Government initiatives to open up the market and attract foreign investment • Increased government spending on infrastructure which has attracted private sector investment • Development of further Educational and Health facilities • Strong demand from end users including Government agencies and private groups in the banking and telecoms sectors. Development of the King Abdullah Financial District and Princess Noura Bint Abdulrahman University is shifting the centre of gravity northwards. The residential sector remains in the upswing of the market cycle, with results from the 2010 census revealing that population growth has been more robust than expected. The increased number of low income expatriates and other demographic shifts are further exacerbating the shortage of affordable housing in Riyadh. Other sectors of the real estate market are currently experiencing falls in average rentals and performance as the office, retail and hotel sectors are becoming more competitive in the light of recent additions to supply. This is creating more favourable conditions for tenants or visitors in these sectors of the market. Further Opportunities in Residential Market
Transcript
Riyadh City Profile – December 2010
on.point
The Riyadh real estate market continues to experience rapid growth due to:
• Government initiatives to open up the market and attract foreign investment
• Increased government spending on infrastructure which has attractedprivate sector investment
• Development of further Educational and Health facilities
• Strong demand from end users including Government agencies andprivate groups in the banking and telecoms sectors.
Development of the King Abdullah Financial District and Princess NouraBint Abdulrahman University is shifting the centre of gravity northwards.
The residential sector remains in the upswing of the market cycle, withresults from the 2010 census revealing that population growth has beenmore robust than expected. The increased number of low incomeexpatriates and other demographic shifts are further exacerbating theshortage of affordable housing in Riyadh.
Other sectors of the real estate market are currently experiencing falls inaverage rentals and performance as the office, retail and hotel sectors arebecoming more competitive in the light of recent additions to supply. Thisis creating more favourable conditions for tenants or visitors in thesesectors of the market.
on.point • Riyadh City Profile • December 2010 2on.point • Riyadh City Profile • December 2010 2
Growth in the national population was slower than anticipated by thegovernment. The 2010 census shows a total of 18.7 million Saudi nationals.The population of Saudi nationals increased by just 2.1% pa between 2004and 2010, compared to a 3.0% growth in the total population.
The slowdown in the growth of the local population has importantimplications for government policy. The growth of the Saudi nationalpopulation has fallen significantly in recent years. At the time of the oil boomof the mid-1970s, the national population was growing at 4.2% per year;twice the level of the past six years. National population growth remainedrapid through the 1990s, during which it averaged 2.8% per year.
The population growth and a declining household size have contributed to asignificant housing shortage across the Kingdom. Annual growth ofpopulation (3.04%) during 2004 and 2010 was greater than the annualgrowth (2.56%) in residential units for the same period. This gap is expectedto grow further over the coming decade, driven in part by a continued declinein average household size.
The jump in the number of expatriates is well above what was previouslyestimated by the Central Department of Statistics and Information. Its mid-2009 estimate of 6.8 million was based on an assumed growth of 2.1% pasince the 2004 census. The expatriate population actually grew by an annualaverage of 5.4% since 2004.
Despite the surge in the expatriate population, we expect the census datastill underestimates the actual numbers. For example, those expatriates thathave remained in the Kingdom after their visas have expired are likely tohave shied away from census data collectors.
Males account for over 70% of expatriates, a reflection that few areaccompanied by their families. It is likely that the bulk of the 2.5 millionexpatriate women are domestic workers.
From just 11% in 1974, the proportion of non-Saudis has grown to 31% ofthe population in 2010. Much of this jump is related to the huge increase ingovernment investment spending, which requires large numbers ofconstruction and related workers. Given the high government spendingplanned over the next few years (expenditure of US$ 385 billion is containedin the 2010-2014 five-year development plan) further growth in the expatriatepopulation can be expected.
A greater expatriate male population than was previously estimated meansthe overall market size for many goods and services may have beenunderestimated. Growth in demand for accommodation, goods and servicesto serve this generally low-income section of the population will beparticularly strong over the next few years.
Census – Preliminary Results
Preliminary results from the 2010 census show the Kingdom’s population at 27.1million, well above the official estimate for mid 2009, of 25.4 million. This increasereflects a far greater expatriate population than had previously been assumed.
Between 2004 and 2010, the number of Saudi nationals rose by 19%, whilethe number of expatriates increased by 38%. An analysis by Jadwa Investmentforecasts that if this growth rate is maintained over the next decade, theKingdom’s population will increase to 37.2 million by 2020 with the proportionof Saudi nationals falling from 70% to 61% over the next 10 years.
An expansionary fiscal policy remains the main growth driver, supportinginvestment and consumption through infrastructure and social transfers.
Quarterly data on economic growth has been published for the first time inthe Kingdom in Q2/2010. Oil was by far the fastest growing sector of theeconomy, though the rate of growth in this sector reduced from 68%(nominal terms) in Q1 to 24% in Q2 but it is still highest among all othersectors. In comparison, growth in the non-oil private sector slipped from 6.7%in the first quarter to 6.2% in the second quarter.
Bank lending to the private sector picked up in both monthly and year-on-year terms in September but absolute additions of credit remain small. Bankdeposits also rose, pushing money supply growth to an eight-month high.
Government: The focus of the 2010 budget remains on capital expenditure.Out of SAR 540 billion, around SAR 260 billion or 48% has been allocatedfor capital expenditure in the 2010 budget, around 16% higher than in 2009.This commitment is evidenced by 652 contracts worth SAR 40 billion beingawarded for infrastructure projects in the first four months of 2010.
While continuing to allocate resources to infrastructure, the budget alsoprioritizes spending in social sectors, namely education and health. This is apositive factor given the need to upgrade the quality of education and healthservices in the Kingdom.
Construction: Increased government spending in key infrastructure projectsthroughout 2009 has paved the way for the construction sector’s strongrecovery. In 2010, the sector’s real GDP is forecast to grow by 6% year-on-year, amounting to SAR 64 billion. The construction sector’s share of non-oilGDP is forecast to reach more than 10% in 2010. The expansion of thesector is evident in the rising labour force, expected to reach 2.75 millionworkers by the end of 2010, a 5% rise on the previous year. Totalexpenditure in the Saudi construction sector, as measured by the level ofgross fixed capital formation (GFCF), is expected to reach SAR 188 billionin 2010, a rise of 13% from the previous year.
Manufacturing: In the first half of 2010, the manufacturing sector posted strongGDP growth of 10.4%, due in part to increased output of cement and otherbuilding material industries that are benefiting from high construction spending.
Inflation: Inflation has continued its upward trend, reaching 5.8% in October2010, lower than the 27-year peak of 11% posted in July 2008, but stillsignificantly higher than the historical inflation rate of 1-2%. Residentialrentals have been the dominant source of inflationary pressures registeringan annual increase of 9.4%. Inflationary pressure from food prices –particularly global wheat prices is on the rise, having climbed to a 22 monthhigh of 8.3% in October.
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Residential Units and Population Growth 1992-2020
Source: CDS, Jadwa, Jones Lang LaSalle
on.point • Riyadh City Profile • December 2010 3
Investing in Education
Princess Noura Bint Abdulrahman University
The largest women-only university in the Arab World will be located in Riyadhon a land parcel of 8 million sq m. With a built up area of almost 3 millionsq m it will have a capacity for 40,000 students. This project includes 14 colleges, research and medical centres. It is alsoexpected to add more than 8,000 residential units that will be divided intohousing for senior staff (400 villas), junior staff (1,000 apartments) andstudent housing (7,000).This project is expected to be completed by 2012. It will not only be a newchapter in women’s education in Riyadh but also a major iconic developmenton the map of Riyadh. Over the coming years there will also be significantlevels of development on sites surrounding the university. These include theKing Abdullah Centre for Petroleum Studies, cluster of Government officesand medical facilities for Defence Ministry that will further strengthen thedevelopment corridor to the north of Riyadh. Development of University andPrince Salman Road (Second Ring Road) has increased the land values inMalaqa, Yasmin and Nurjis District. Yasmin and Malaqa especially have seenhigh levels of interest in developing residential developments for Saudi families.Prices of houses in those districts have increased 10% to 15% in the quarter.
Property Clock
There is currently significant variation between sectors in terms of theirposition on their respective market cycles in Riyadh.
Residential: The residential market is experiencing moderate increases in rentsand prices on the strength of recovering confidence and a return to economicgrowth. Rents have been more robust than sale prices over the last quarter.
Office: Demand is strong and few new projects are being launched. Afterrecent declines rents should stabilise before the ‘supply shock’ of the megaprojects hits the market.
Retail: Increasing retail sales and the introduction of new brands to Saudi Arabiamean that popular locations are starting to increase rents. However, many mallsare still struggling and will need to be repositioned before rents can increase.
Hotels: Demand continues to improve and the market has performed in linewith 2009 conditions over the past six months. The growing pipeline of newrooms is likely to increase competitive pressures in 2011/2012.
Note: The property clock is a way of locating the relative position of the different sectors within their short-termprime rental cycles. Asset classes can move around the clock at different speeds and directions.
Hotels position on the clock represents the RevPAR rather than rents which is calculated as Occupancy x ADR.
200,000 sq m of new office space will be completed in Riyadh in 2010 and weexpect a similar amount in 2011. Most of this new supply remains clustered inthe CBD and central districts, although there are now several new office buildingsin a cluster emerging at the intersection of Olaya and the North Ring Road.
Anticipated Future Supply – Major Projects
Projects GLA (sq m)
Dabab Centre (2010) 19,000
Al-Bayt 52 (2010) 32,000
Platinum 2 (2011) 15,000
Al Munajem Tower (2011) 17,000
Al Anoud 2 (2011) 17,500
Waseel Tower (2011) 33,000
Home Office (2011) 50,000
Riyadh Business Gate (2011) 105,000
Tamkeen Tower (2012) 45,775
Olaya Towers (2012) 80,000
Granada Business Park (2012) 133,600
King Abdullah Financial District Ph1 (2013+) 750,000
Source: Jones Lang LaSalle
While supply has been substantial, a large proportion of this new supplydoes not meet typical corporate requirements for safety or parking. As manyof the empty lots in the CBD are filled in by development, access to parkingis becoming an ever increasing challenge for occupiers with large proportionsof staff who drive to work.
Office development is increasing in the suburbs and will offer tenants asolution to their parking challenges, and we expect employment to follow.Projects such as Riyadh Business Gate, Tamkeen Tower, and Granada BusinessPark will all offer parking ratios superior to most buildings in the CBD.
Several of the towers of the King Abdullah Financial District are nowemerging. There are 30 plots being developed by the Public Pension Agencyin addition to towers for Samba, SAMA, CMA and Tadawul. Substantialinfrastructure in terms of power, district cooling, IT network and a monorailsystem still needs to be put in place and we expect tenants will be able totarget occupation for 2013. Lease negotiations with the various landlordsshould be possible from next year.
Demand
What is impressive in 2010 is that so much of the new supply is beingabsorbed. Al Bayt 19, Al Bayt 52, Riyadh Business Gate, Canary Centre, allsecured substantial leasing commitments.
The government was the largest source of demand and a lease by theMinistry of Justice for 24,000 sq m is the largest deal of the year in 2010.Several new single user buildings have also been developed for Ministriessuch as Defence and Education.
Buoyant multinational demand is being driven by four factors:1. Increased headcount due to growing local market 2. Market entry / start-up offices3. Restructuring of license arrangements with JV partners4. Trading up to new buildings that are compliant with corporate space
standards
Multinational Leasing Activity in 2010
Lessee Area (sq m)
GE (Health) 1,300
Juniper Networks 1,300
Aegis (Essar Group) 1,500
MSD (Merck) 1,680
Siemens 9,000
There has also been a number of private sector leases signed for between500 to 1,000 sq m, including: Lessee
Barclays 500
Servcorp 500
IBM 600
SAP 750
JP Morgan 800
The private sector tenants generating the most demand include defence/security, pharma/health, engineering and IT.
Strong local demand has kept the vacancy levels at around 10%, despite thesignificant level of additional supply brought to the market during 2010.
Rentals have declined across the market during 2010, with the greatest fallsbeing experienced for buildings outside of the CBD, older buildings and thosewhere landlords are seeking to lease the whole building to a single tenant.Average rents for Grade A buildings currently vary from SAR 1,000 to SAR1,500 with the rental range for Grade B buildings having reduced further tobetween SAR 600 and 850.
Market Outlook
Demand is expected to remain high on the back of strong oil prices andgovernment spending. Few new projects are being launched although thepipeline is still full. After recent declines rents should stabilise before the‘supply shock’ of the mega projects hits the market in 2013.
Riyadh has a total stock of housing estimated at 930,000 units. Censusresults are not yet released at the city level, but it is likely that the averageannual supply will prove to be above the 30,000 previously estimated by theMinistry of Economy and Planning. The absence of reliable data abouthousing completions makes it difficult for lenders, investors and developersto make investments in new housing, and micro-builders therefore continueto drive the market.
Large projects such as Al Wasl, Ajmakan and Shaams Al-ARiyadh have notdelivered any units during 2010 and progress on these developments is veryslow. Medium size projects like Blncyah, Manzel Al-Qurtaba, Canary, Al-Bayt32, Memar Yasmeen and Sindad have, however, delivered over 950 newvillas in recent months.
Tight construction credit and regulations restricting sales until infrastructurehas been completed have discouraged the development of large communities,as few players have the funds to develop the infrastructure on land parcelsof one million sq m. Some developers have funds committed to incompleteprojects where partial infrastructure has been developed. The lack ofadditional financing is resulting in developers being unable to complete theinfrastructure and start the construction of such projects.
Rabiah is the only major new residential project announced in recent months.Most new projects are small scale, reflecting the piecemeal nature of thedevelopment industry with most developers unable to finance major new projects.
Nismat-Ar-Riyadh by the Thabat JV is the first significant residential projectin Riyadh to obtain permission under the new escrow laws for off-plan sales.The government has appointed a consultant to monitor the progress of theproject and to ensure the reinvestment of sales receipts. The market will bewatching with keen interest to see if Thabat is successful with this newapproach to sales and marketing.
The government is working to increase the supply of housing for allsegments of the population in Riyadh. MODON has recently awarded twocontracts to build accommodation for blue and white collar employees inindustrial cities and has also approved seven licenses for new expatriatecompounds aimed at the increasing population of professional expatriates.Charity organizations (e.g. King Abdullah Housing Development Foundationfor His Parents, Prince Sultan Foundation for Philanthropic Projects andPrince Salman Foundation for Philanthropic Housing) are also working toincrease the stock of affordable housing.
Demand
Saudi population growth, increased expatriate arrivals and higher immigrationinto the city for employment or education are driving demand and creatingfurther opportunities across many different segments of the residential market.
Much of the proposed supply has however not been well targeted to specificmarket segments and developers have consequently delayed plans for manyapartment projects in secondary locations due to restricted levels of interestand demand. Due to cultural reasons, most Saudis still seek an independentvilla and the market for apartment projects in Riyadh has therefore beenlargely supported by expatriate end-users, employers or investors looking topurchase a whole building for leasing or resale.
Developers are starting to shift their focus to ‘mid-market’ single familydwellings that can be accepted by both Saudi and expatriate buyers. Thiscategory will enable the volumes to develop large tracts of land, but scalealso creates absorption risks for developers.
Duplexes are emerging as an increasingly popular product type for a populationthat does not like to be in an apartment and can not afford a villa. Most ofthe transactions in the duplex segment are currently in the SAR 750,000 toSAR 900,000 range.
Expatriates comprise an increasing portion of buyers in the Riyadh residentialmarket, representing between 15-50% of purchasers within projects currentlybeing marketed. Although Arab and Asian expats account for the majority ofhouses purchased this year, few developers are looking into the preferencesof expatriates in terms of design, floor plan or amenities offered. As muchas 90% of expatriate buyers have purchased property through some kind ofloan or mortgage facility.
The package of mortgage laws that has been discussed since 2007 remainsunder review, although this has not stopped development of the home financesector. The Deutsche Gulf JV is expanding its lending activities and thePublic Pension Agency has started a home loan program.
While performance has been mixed, the overall trend is one of increasingprices in the villa market with some projects experiencing sales of villas atprices of 10-15% higher than those achieved early in 2010.
Prices in the apartment sector have been typically stable, although someprojects in the north such as Malaqa and Yasmin have seen a marginal (upto 5%) uplift since early 2010. Most apartments to the south and west of thecity are still trading at the same pricing levels seen earlier in 2010.
In contrast, the rental sector has seen more demand for apartmentscompared to villas. Due to low affordability, most of the expatriates in Riyadhare living in apartments. Apartment rents in Riyadh have increased about10% while villa rents have increased just 5% since early 2010. Given thereluctance of Saudi nationals towards living in apartments, this sectorremains more focused on rentals to expatriates rather than sales.
There remains strong demand for expatriate compounds at the upper end ofthe market. Due to the life style offered, most existing compounds areexperiencing 100% occupancy and rents are increasing by 10%-15% per year.There is increased interest from corporate customers to rent entire compoundsfor their employees and this interest may further boost rental levels.
Anticipated Future Supply – Major Projects
Projects Units
Al Dar (2011) 135
Al-Ghorub (2012) 300
Al-Bayt 32 (2012) 400
Al-Rabiah (2013) 506
Burj Rafal (2014) 416
Manzel Qurtaba (2014) 1,400
Shaams Al Riyadh (2014) 3,189
Nismat Riyadh (2014) 4,200
Source: Jones Lang LaSalle
Market Outlook
We expect to see more professional developers enter the Riyadh housingmarket in 2011-2012, although high land prices are proving to be a challengefor many interested investors and developers. There should be cyclicalsupport for further increases in residential prices and rents during 2011.
Landlords are aware of shortages of rental supply in some prime districtsand are asking for rental increases. In the absence of rental caps; conditionsare expected to remain landlord favourable and some increase in rental levelscould be experienced during 2011. The sectors most likely to witness thisgrowth are mid-market apartments and expatriate residential compounds.
The total stock of retail space in Riyadh is estimated to be around 2.7 millionsq m (across all formats). As the city continues to expand, the stock of retailspace is expected to increase to over 3 million sq m by 2014.
The Riyadh retail market has witnessed a major expansion this year, withalmost 400,000 sq m being added to the existing stock. The West and Southregions have experienced the majority of new development in projects suchas Panorama Mall (81,008), Souq Al Sharq (130,000), Bilda Centre (50,000),Hamra Al-Sharq (78,895) and Al-Haram Plaza.
Due to non-availability of large parcels and high land prices in more centrallocations, the focus of new retail development has been in peripheral areasof Riyadh. A major retail destination is developing around exit 16-17 on thering road to the south of Riyadh, building upon the opening of IKEA and theRimal Centre in that location in 2007.
2010 represents the peak in the current supply pipeline, with more limitedlevels of new retail supply expected to enter the Riyadh market over the next2 to 3 years.
Anticipated Future Supply – Major Projects
Projects GLA (sq m)
Al-Jazeera (2011) 8,700
Lulu Hypemarket (2011) 20,000
Al Qasr Suwaidi Mall (2011) 80,000
Olaya Centre (2012) 8,000
Nismat-Retail (2014) 100,000
Source: Jones Lang LaSalle
Demand
Consumer confidence and spending levels have continued to increase sinceRamadan. According to data from SAMA, the value of point of saletransactions has reached its highest ever level, increasing by 28% in Q3 2010compared to Q3 2009.
Reflecting this increased sales and spending, demand from retailers remainsstrong. Many retailers have expanded during the third quarter. MedasFurnishers, Paind’or, SACO and Extra are examples of regional retailers thathave taken additional premises in Riyadh. Lulu supermarket has opened itsfirst outlet in the city (near exit 16) and has also rented the space for itssecond store that will open next year.
The market has also seen the emergence of large stand alone retailers,taking freestanding stores. Major local chains that have opened new storesclose to junction 16 of the Riyadh ring road include SACO, Extra, Electro andOthaim supermarket.
There has also been an expansion of small retailers, with more than 4,000 sq mof retail space being preleased by furnishers, carpet and other accessorystores in Souq Al Sharq.
Following the withdrawal of Carrefour and many other existing tenants fromLe Mall project, the centre has been rebranded as “China Souq”. The ownershave managed to lease most of the 30,000 sq m of retail space, creating thefirst Chinese market of its kind in Riyadh.
Average rents remained unchanged over Q3 2010, halting the declineexperienced in the previous quarter. This suggests the overall market isreaching some stability around the bottom of its cycle.
Malls in the CBD, especially those on King Abdullah Street attract the highestrents in the Riyadh market (between SAR 2,000 and SAR 2,800 sq m) andthere has been little change in these levels over the past quarter.
Rents have however continued to decline for poorer performing projects suchas Bustan Centre, Akaria Retail and Sadhan Sulemania Square with manyretailers having left these projects due to low footfall and poor propertymanagement. With landlords working to secure new tenants to theseprojects, rentals are likely to decline further and it is possible that some retailspace will be converted to office use in these malls.
Malls in secondary locations such as Gardenia, Flemingo, Sadhan Rabwaand Rimal Centre are experiencing high vacancies (from 40% to 80%) andare surviving on the performance of their anchor tenants. These centres arefinding it increasingly difficult to attract and retain branded speciality retailers,given the increased choice of space now available to tenants in new andbetter quality centres.
Market Outlook
Given the large influx of new retail centres that will take some time for themarket to absorb and lease up, landlords need to be more innovative to retainanchor tenants who are benefiting from increased choice of locations. Rentsare likely to increase in the better quality centres that offer good access,covered parking and a strong mix of retail, leisure and entertainmentretailers. For other centres, rental levels are likely to decline further in theface of better quality competition.
The supply pipeline is likely to be dominated by strip retail and standalonecentres in the short term. The lack of major new malls completing in 2011/2012 should provide the market with the opportunity to recover, although thismay well also involve the withdrawal or conversion of some poorer qualityretail centres.
Data from the Tourism Information and Research Centre (MAS) shows Riyadhhad 9,007 hotel rooms at end of 2009. Riyadh represents 8.8% of the overallSaudi Arabia hotel market, trailing other regions like Makkah and Madinah.
The four and five star segments together account for approximately 40% ofthe overall room supply in the city and a large proportion of this is withininternationally branded hotels. The MAS has recently introduced a revisedgrading system for hotels and has de-classified several properties,downgrading them due to their inability to meet the required standards.
There has been no addition to the inventory of hotel rooms in Riyadh in 2010to date. The end of this year will see the expansion of the Rosewood Hotelat Al Faisaliyah which will add another 106 rooms (as part of its south wing)to the market, increasing the hotel’s total inventory to 330 rooms.
The supply pipeline will see a significant level of new hotel rooms added tothe market over the next two years, with most of this being in branded hotels.The bulk of the future supply is concentrated along the existing hub of KingFahd Road and Olaya Street within the CBD, although there are also hotelproperties in a number of the major suburban projects such as King AbdullahFinancial District, Granada Centre and Riyadh Business Gate. Several of theprojects planned for next year have now been delayed to 2012-2013 in the lightof more competitive market conditions and restrictions on project financing.
There are also a number of furnished apartment projects under constructionfor various chains, with developers seeking to tap into this new market sectorwhich is emerging as the preferred accommodation type for domestic visitorsto Riyadh. With strong demand for furnished apartments being experiencedfrom overseas visitors, the upscale branded serviced apartment sector isalso expected to undergo significant expansion in Riyadh. Notable extendedstay projects currently under construction include the 106 key StaybridgeSuites Olaya (2011), Boudl Olaya & Tahilia with 200 apartment units (2012)as well as a 119 unit Marriott Executive Apartments (2011).
Demand
The quality hotel segment in Riyadh is driven primarily by business travellersand corporate guests. According to MAS, Riyadh ranks as the most visitedcity for business purposes in Saudi Arabia.
Demand from government bodies also forms a significant portion of thedemand for room nights in the city. The general revival in global business andtrade in 2011 and the planned increase in government spending, will positivelyimpact hotel room night demand in Riyadh driving up occupancy levels.
Domestic business guests comprise about 65% of the overall room nightdemand in Riyadh. The city does not currently attract a significant volume ofleisure visitors. The tourism authorities are attempting to boost leisuredemand by increasing the city’s tourism offering. Such moves received amajor boost earlier in 2010 with the Al Turaif district in Al Diryah area beingdesignated as a UNESCO World Heritage Site.
Following an upward trend in market performance between 2005-2008, thehotel market in Riyadh witnessed a significant decline in occupancies andRevPAR in 2009 reflecting the impact of the global economic slowdown. ThisRevPAR contraction has continued in the first three quarters of 2010. Averageoccupancies have decreased to below 60% for the first time since the early2000s and average rates have also fallen (after remaining largely unchangedin 2009), leading to RevPAR figures plummeting by almost 11% in 2010.
The five star hotel segment (which includes properties such as the FourSeasons, Rosewood, Intercontinental and Sheraton) has consistentlyoutperformed the overall market in Riyadh, reflecting continued strongdemand for this segment. The 5 star market remained relatively stable overthe first half of 2010, however the third quarter experienced the normalseasonal decline in performance associated with Ramadan and the summerholiday period.
Market Outlook
The market is likely to remain relatively stable at around current levels ofperformance in 2011 with serviced apartments expected to be the strongestperforming sector of the market. Significant additions to hotel room stock in2012-2013 could potentially create a risk of oversupply in the medium term
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