Promising New Data on the

Dammam Metropolitan Area

Ehsan Bayat

Promising New Data on the Dammam Metropolitan Area For anyone interested in commercial real estate and property investment

management, Jones Lange LaSalle (better known as JLL) is a source of valuable data and reports for markets around the world. The firm launched its operations in 1783, and it has steadily grown into the global leader in its field. Most recently, JLL expanded its presence in Saudi Arabia by opening an office in Al Khobar, a coastal city in the Dammam Metropolitan Area of the Eastern Province.

The new office preceded the first printing of the Dammam Metropolitan Area (DMA) Real Estate report, a publication that will be produced biannually. Although the DMA accounts for a substantial percentage of the oil and gas industry in Saudi Arabia, JLL contends that the proximity of the region to surrounding nations (Bahrain, Qatar, UAE, etc.) makes it a special point of interest when it comes to real estate. From overall market stabilization to specific sector projections, the DMA 2016 report features a wealth of data.

Macroeconomic Outlook

Considered as a whole, the Saudi Arabian GDP is slated for decline in 2016, largely due to an underperforming oil market. For reference, the 2011 GDP grew by 9.96 percent, while 2016 estimates sit at 0.8 percent.

The government aims to alleviate its dependence on oil by investing more heavily in non-oil revenue sources such as real estate. Shifts in the economy from this diversification, however, will likely translate into real estate growth in the long term, rather than a more accelerated upturn in the short term.

Narrowing in on Saudi Arabia, the DMA includes Dammam, Dhahran, and Al Khobar. Together, these neighboring cities account for roughly half of the oil and gas produced in the Kingdom, and they serve as the driving commercial force in the Eastern Province.

The anticipated economic slowing in Saudi Arabia will undoubtedly affect the DMA, especially as a recent real estate cycle has gone through its course in the region. During 2014 and 2015, several project were completed, and these properties generated a boost in rentals and revenue. JLL writes that certain aspects of the market should maintain stability, while others, such as the hospitality sector, are expected to rise.

Residential Summary

According to JLL estimates, the total number of residential units available in the DMA is 331,000. These include villas and apartment buildings, two property types that should gain popularity with developers in the near future. Distribution of residential real estate tends to favor the center of the DMA, but the west side is gaining increasing attention - this trend has emerged in part because of the lower land costs in that area.

Roughly 26,000 units should be completed in the coming years. Contributing to this number are master-planned developments built by Emaar, Injaz, and other notable firms. These communities include as many as 300 homes each. Quality units-for-lease will take precedence in the market, as many projects have nearly reached maximum occupancy levels.

Office Properties Overview

Grade A office buildings lead the office market in the DMA. In its 2016 report, JLL observes the trend of businesses creating a demand for more top-shelf properties and in order to upgrade from their current locations.

The DMA features just short of one million square meters of office space, including the recent completions of Bottoyr Tower, Dar Al Yawm, and Al Othman Business Tower, among others. Developers project an additional 91,000 square meters to enter the market by the end of the year.

As a result of the office market's behavior, tenants in the area have gained more negotiation leverage of late. Another factor influencing office real estate is the appeal of properties in the Kingdom of Bahrain, located off the shore of Al Khobar.

Retail Market Sketch

The retail market in DMA is comprised of two major shopping centers: Mall of Dhahran and Al Rashid Mall. Between these properties and other smaller structures, the area holds more than one million square meters of retail space. Projections in the JLL report assert that this number will steadily grow, with roughly 324,000 square meters due for completion by 2018.

Occupancy rates for the existing malls starts at 95 percent and ranges to 100 percent. The more popular malls attract as many as 40,000 visitors each day, and with the leasing figures where they stand, the DMA possesses strong potential in its retail sector.

Hotel Sector Synopsis

Ranging in quality from three to five stars, the hotel count in DMA is about 6,100. Construction delays have prevented projects from being completed and in operation, but this number should grow by at least 2,000 by 2018.

Proximity plays a leading role in this anticipated trend, given that DMA is close to so many other Gulf Cooperation Council nations. The list of hotels either recently completed or soon entering the market include Park Inn by Radisson Dammam, Kempinski AL Othman Al Khobar, and Double Tree by Hilton Al Khobar Corniche.