CBRE's second-quarter review puts prime Grade A office occupancy in Riyadh near capacity with rents up 3 percent year on year, while the residential market softened and hotel demand thinned. The capital also lost its usual first place in monthly contract awards to the Eastern Province in June.
Riyadh is running two construction markets at once. One is short of finished space and letting contracts as fast as it can. The other is delivering into demand that has cooled since the buildings were sanctioned.
The first is offices. CBRE's second-quarter review of the Saudi market puts prime Grade A occupancy in the capital close to capacity, with average prime rents up 3 percent year on year to SR3,320 per square metre. Around 0.6 million square metres of office space is scheduled for delivery in Riyadh during 2026, of which roughly 0.2 million square metres is Grade A — a pipeline that would look substantial in most cities and is still not obviously enough here.
The demand behind it is largely policy-made. CBRE counts 517 companies now committed to establishing regional headquarters in the Kingdom, ahead of the 480 the government had targeted for 2030. Those commitments convert almost entirely into Riyadh leasing and fit-out work, and they arrive with a specification: international occupiers want Grade A floorplates, certified buildings and landlords able to deliver on a schedule. Total office stock in the city is heading toward about 6.3 million square metres by the end of the year. Retail has held up in parallel, which keeps a second stream of fit-out and mall extension work moving.
For contractors the office pipeline is the most dependable stream of work in the city and the least glamorous. Buildings already under construction have to be finished, and the fit-out demand behind those headquarters commitments arrives after the shell is complete, in packages small enough for mid-tier firms to bid and short enough to price with confidence. It is also the part of the Riyadh market least exposed to a change of mind at a giga-project sponsor, because the occupier has already signed.
Hospitality is the mirror image. About 6,700 hotel rooms are under construction in Riyadh, a pipeline sized during a period when corporate and conference travel into the capital was expanding with giga-project spending. That travel has thinned as project activity slowed, leaving new rooms leaning more heavily on domestic tourism to fill. The construction work continues — the rooms are largely committed — but the operators taking delivery of them are entering a softer market than the one that justified the investment case.
Residential is the third strand, and it weakened in the second quarter after several years in which Riyadh land and apartment prices ran well ahead of incomes. That is not obviously bad news for contractors, because the state's response to affordability has been to build. The Khuzam and Nour Khuzam residential district in Riyadh was among the projects the Saudi Contractors Authority recorded as awarded in May, in a month that also included the Sheikh Jaber Al-Ahmad Al-Sabah Road.
The more interesting change is geographic. In June the Eastern Province took the largest share of national contract awards on both measures — 10 of 25 projects and more than SR11.4bn — with Riyadh second at more than SR10.8bn. For a market accustomed to the capital leading every table, that is worth noting. It reflects the weight of Aramco-linked, industrial and water and energy work in the east at a point when Riyadh's own pipeline is dominated by a few very large programmes rather than a broad spread of mid-sized awards.
Those programmes are, individually, enormous. Expo 2030 Riyadh has begun site infrastructure on a six million square metre exhibition ground and expects main construction to break ground in the third quarter. Diriyah, valued at $63.2bn, has now awarded more than $29bn of construction contracts and is building an opera house, a museum, retail districts and hotels concurrently. New Murabba has completed excavation and foundations for the Mukaab and is preparing to procure the superstructure. King Salman International Airport produced one of the single largest awards of 2025, at about SR20.63bn for six parallel runways.
What that concentration means in practice is that Riyadh's construction demand is less sensitive to the property cycle than the headline numbers suggest, and more sensitive to a handful of client decisions. A month in which none of the big four sponsors lets a package looks like a collapse in the data; a month in which two of them do looks like a boom. Neither is a reliable read on underlying activity.
The composition of the work is shifting too. The share of the capital's pipeline made up of speculative commercial towers is falling relative to public realm, utilities, transport and event infrastructure — work that is tied to dates rather than to rents. That favours civil contractors and utilities specialists over the vertical construction firms that dominated the last cycle, and it changes what a contractor needs on its balance sheet: earthworks, deep services and long-duration infrastructure carry different retention and cash-flow profiles from a tower with a pre-let anchor tenant.
For occupiers the practical position is unchanged. Grade A space in Riyadh remains scarce, rents are still rising, and the 2026 delivery pipeline will be absorbed. For developers weighing the next scheme, the second-quarter numbers are the first sign in several years that the city's residential and hospitality markets can be oversupplied, and that not every square metre built in Riyadh finds a tenant at the price the model assumed.