DUBAI (Reuters – The demand for offices in Riyadh is increasing after Saudi Arabia stated that foreign companies should relocate their regional headquarters to the Kingdom, Knight Frank, a real estate consultant said in a report.

Saudi Arabia is the largest Arab oil exporter, and it announced in February that the government would allow foreign companies to establish headquarters in Saudi Arabia until 2023 or lose out on contracts. This move was made in an effort to attract investment and create jobs.

Knight Frank explained that the rising demand in Grade A office space, especially in Riyadh (the capital of Saudi Arabia), has created upward pressure on grade A office leasing rates. These have increased by 2.9% in 12 months from Q3 2021.

Saudi Arabia announced last month that it has granted 44 licenses to international corporations for the establishment of regional headquarters in its capital.

CBRE, a real estate consulting firm, reported this week that visitation to Saudi Arabian workplaces during the third quarter surpassed pre-pandemic levels, as per Google’s mobility data.

The forecasts show that Riyadh’s office supply will rise by 8.1% in the coming year.

As part of Crown Prince Mohammed bin Salman’s efforts to reduce oil dependence and create new industries, the ultimatum from Saudi Arabian headquarters placed the kingdom at the mercy of the United Arab Emirates, a regional hub for business.

Knight Frank explained that the “clearly, the decision make Riyadh a regional rival of Dubai involves its own considerations”, citing issues such as quality of office space and taxation differences.

According to the consultant, “Despite all this, Saudi Arabia remains the region’s most important economy with a population around 35,000,000, strongly suggesting there is potential for additional business hubs in the area.”