Development to slow in Saudi Arabia's Eastern Province but pick up in Bahrain

Development projects in Saudi Arabia’s Eastern Province look set to slow as the market nears the peak of its current cycle, according to a new study.

JLL’s inaugural report on the Damman Metropolitan Area (DMA) says potential project delays and lower completion rates are more likely to happen as Saudi GDP growth is forecast to slow to 1.7 per cent this year, according to National Commercial Bank – its slowest growth rate since 2009.

DMA is Saudi Arabia’s fourth-biggest urban area, with a population of 1.7 million spread across the neighbouring cities of Dammam, Al Khobar and Dhahran.


It has about 331,000 homes, mainly older villas and low-rise apartments, with a further 26,000 units due within the next three years. Most of these are smaller schemes by local developers, but larger master planned schemes by the likes of Emaar Middle East, Riyadh-based Injaz Development and Kuwait-based Al Argan are also under way.

Expats make up about 44 per cent (750,000 people) of the local population, which is driving demand for residential compounds. There are 15,100 homes in compounds and occupancy rates run at close to 100 per cent, although many expats still prefer to base themselves in nearby Bahrain and commute into Saudi Arabia.

In the hospitality market, hotel capacity is likely to grow by almost a quarter during the next two years, as 2,000 rooms are added to the current stock of 6,100. New entrants will include the 236-key Four Points by Sheraton Dhahran and the Kempinski Al Othman Al Khobar.

“As the Saudi economy changes, we will see competition in key sectors such as retail and hotels start to develop at a greater pace,” said Jamil Ghaznawi, JLL’s country head for Saudi Arabia.

Meanwhile, CBRE has said that the residential market in neighbouring Bahrain is showing signs of a pickup in construction activity for the first time since the global financial crisis and the subsequent unrest in the country.

Although the number of transactions dropped by 6 per cent quarter-on-quarter to 268.2 million Bahraini dinars (Dh2.8 billion), several new projects were launched, including Abu Dhabi-based Eagle Hills’ US$3bn Marassi Al Bahrain scheme within the Diyar Al Muharraq project, as well as new apartment launches at Dilmunia and Durrat Al Bahrain.

Indeed, despite the slowdown in the oil market, the non-oil sector has contributed to sustained economic growth, with Bahrain’s Economic Development Board predicting GDP to remain at 2.9 per cent for this year, CBRE said.

“This growth has been dominated by construction, private education, health care and tourism, and while real estate transactions have dropped, development activity and project planning has gained pace,” said James Lynn, a director of research and consultancy at the company.

mfahy@thenational.ae

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