A robust retail sector is a key driver of Saudi Arabia’s economic diversification efforts. Contributing 23% to the non-oil economy, the sector is targeted to surpass $122.65 billion by 2024.

A new report by Knight Frank forecasts a significant expansion of Riyadh’s retail sector. Total retail space is projected to surge by 28% to 4.6 million square meters by 2026, attributed to the ongoing development of shopping malls and lifestyle spaces in the Saudi capital.

Knight Frank’s Head of Research for the Middle East and North Africa, Faisal Durrani, anticipates an additional 100,000 square meters of retail space to be completed in Riyadh by the end of 2024. He emphasizes the need for mall operators, developers, and retailers to prioritize “experiential retail offerings” to stay competitive in this rapidly evolving market.

According to the report, average rental rates across Riyadh’s retail market have increased by 3% to $726 per square meter in the past year. In comparison, occupancy rates have climbed 5 percentage points to 90% during the same period. This growth is likely fueled by the city’s expanding tourism sector.

However, the report presents a contrasting picture of other Saudi cities. Jeddah and the Dammam Metropolitan Area have witnessed subdued retail market growth, with occupancy rates dropping slightly. Average rents have also declined in these cities compared to Riyadh.

This positive outlook is bolstered by a surge in foreign direct investment in retail and e-commerce, fueled by the government’s 100% foreign ownership policy. The e-commerce market witnessed growth of 28% in 2023, reaching $41.8 billion.

The report also acknowledges the significant impact of giga-projects, large-scale development initiatives designed to transform Saudi Arabia’s real estate landscape. These projects are expected to contribute over 5.3 million square meters of retail space by 2030, further supporting the country’s ambitious tourism and economic diversification goals.

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