Closing Bell: Saudi main index closes in green

RIYADH: The Saudi capital is projected to be among the 15 fastest growing cities by 2033 due to a 26 percent increase in population and continued government spending on infrastructure.

According to the Savills Growth Hubs Index, Riyadh is the only non-Asian city on the list, with its growth linked to a population increase from 5.9 million to 9.2 million over the next 10 years, requiring improved amenities and services.

This is in line with Saudi Arabia’s Vision 2030 program, which aims to develop Riyadh as a residential and commercial hub while diversifying the economy and reducing dependence on oil.

Richard Paul, head of professional services and advisory at Savills Middle East, said: “Saudi Arabia boasts a population of around 36 million people and a staggering 67 per cent are under 35 years of age. The employment potential and ultimate purchasing power of this segment The number of inhabitants in the next decade is enormous.”

The Savills report noted that the office space market in Riyadh is supported by demand from regional headquarters, and growth in tourism is driving demand from the retail sector near popular tourist destinations.

In the city’s business development sector, more than 120 international firms relocated their regional headquarters to Saudi Arabia in the first quarter, a year-on-year increase of 477 percent.

Through the Regional Headquarters Program, Saudi Arabia has introduced new incentives for multinational companies to move their regional headquarters to the kingdom.

These incentives include a 30-year exemption from corporate income tax and withholding tax related to headquarters operations, along with rebates and support services.

Some of the leading firms that have opened regional headquarters in the kingdom include Northern Trust, Bechtel and Pepsico, as well as IHG Hotels and Resorts, PwC and Deloitte.

In June, PayerMax, a global payment solutions provider, expanded its presence in the Kingdom by establishing its regional headquarters in Riyadh.

“We are excited to establish our headquarters in Saudi Arabia, which marks a strategic move to strengthen our presence in the region and demonstrates our long-term commitment to Saudi Arabia and the surrounding region,” said Wang Hu, co-founder of PayerMax.

In the same month, multinational professional services firm EY decided to establish its regional headquarters in Riyadh, joining a growing list of international companies in the city.

Abdulaziz Al-Sowailim, Chairman and CEO of EY MENA, said: “EY is proud to play a role in innovative and cutting-edge strategies that elevate KSA’s position as a pioneer both regionally and globally.”

Ramzi Darwish, head of Savills in Saudi Arabia, cited the regional headquarters as a key reason for the city’s expected growth.

“A 30-year regional headquarters tax break, an expanding market and promising prospects are attracting international companies and cementing Riyadh’s position as an important regional hub for leading businesses in a variety of industries,” he said.

Citing government data released earlier this month, the British real estate consulting firm pointed out that foreign direct investment in the kingdom rose 5.6 percent to SR 9.5 billion ($2.53 billion) in the first quarter of this year, compared to the same period. in 2023.

“Riyadh is experiencing a remarkable increase in corporate interest, with more than 180 foreign companies setting up their regional headquarters in the city by 2023, surpassing the original target of 160. This growing confidence reflects the strong potential of the Saudi capital,” added Darwish.

In May, an analysis by S&P Global highlighted that the opening of free economic zones and the regional headquarters program could accelerate the flow of foreign direct investment into the kingdom.

Earlier this year, Saudi Arabia’s General Authority for Small and Medium Enterprises also highlighted that the program had significantly boosted Riyadh’s economic growth.

Saudi Arabia’s Minister of Economy and Planning Faisal Al-Ibrahim noted in January that Riyadh’s successful bid to host EXPO 2030 underscores the kingdom’s commitment to sustainable economic and social development.

He added that the international event will further strengthen the country’s position as a leading global destination for trade, tourism and innovation.

Additionally, a report published by Henley & Partners in June projected that more than 300 millionaires will move to Saudi Arabia by 2024, with Riyadh and Jeddah becoming increasingly popular among high-net-worth individuals.

Global perspectives

Together with the Resilient Cities Index, the Savills Growth Hubs Index examines economic strength and forecasts trends to 2033 to identify cities with high wealth growth and economic expansion.

Indian and Chinese cities dominate with five places in the top fifteen, followed by Vietnam with two and the Philippines, Bangladesh and Saudi Arabia with one each.

The index affects projected gross domestic product until 2033, future credit ratings at the country level, personal wealth of residents, population growth and migration trends.

According to the report, Indian cities including Bengaluru, Delhi, Hyderabad, Mumbai and Kolkata have made it to the top 15 growing cities.

Chinese cities that made the list include Shenzhen, Guangzhou, Suzhou and Wuhan.

Manila, the capital of the Philippines, also secured a spot.

“Economically, cities in India and Bangladesh have average GDP growth of 68 percent between 2023 and 2033, followed by cities in Southeast Asia, including Vietnam, and the Philippines at 60 percent,” said Paul Tostevin, director and head of the department. Savills World Research.

He added: “As global growth continues to turn from west to east, the implications for cities are multiplying. The new centers of innovation will become magnets for growing and expanding businesses, boosting demand for offices, manufacturing and logistics space and homes.”

Tostevin further pointed out that increasing personal wealth and disposable income will drive opportunities for new retail and leisure development in these expanding cities.

Savills emphasized that Asia’s economic transformation, with its increasing focus on technology-driven growth, underpins the dominance of the region’s cities in the rankings.

Tostevin also emphasized that sustainable development, education and workforce growth are critical factors that will shape the future growth of cities.

“Today’s global growth centers will not automatically turn into tomorrow’s resilient cities. To do this, they will need to consider their own paths to more environmentally sustainable development and improve education and labor force participation. They will also need to facilitate stable, transparent and liquid real estate markets,” he added.

The report goes on to say that much of Asia’s cities will also see an expanding middle class as personal wealth rises significantly across the region.

The analysis added that Asia’s traditional manufacturing competitiveness will continue to drive urban growth in the region.

“You wouldn’t want to overlook traditional factory drivers. They are still significant, particularly where traditionally low-cost land and labor markets are becoming more expensive, forcing industries to consider relocating to other areas,” said Simon Smith, Hong Kong-based senior director of research and advisory at Savills.

Savills conducted the study using city-level data from Oxford Economics, specifically analyzing cities with a GDP of over $50 billion.

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