RIYADH: Saudi Arabia’s capital is projected to be among the top 15 fastest growing cities by 2033, driven by a 26 percent population increase and continued government infrastructure spending.
Riyadh is the only non-Asian city on the list, and its population is expected to surge from 5.9 million to 9.2 million over the next decade, according to the Savills Growth Hub Index, requiring it to boost amenities and services.
This is in line with Saudi Arabia’s Vision 2030 program, which aims to develop Riyadh as a residential and business hub while diversifying the economy and reducing reliance on oil.
Richard Paul, head of professional services and consultancy at Savills Middle East, said: “Saudi Arabia has a population of around 36 million people, with a staggering 67 per cent of them under the age of 35. The employability and ultimate purchasing power of this demographic over the next decade is enormous.”
The Savills report noted that Riyadh’s office market is being underpinned by demand for regional headquarters, while growth in tourism is driving retail demand near popular destinations.
The city’s business development sector saw more than 120 international companies relocate their regional headquarters to Saudi Arabia in the first quarter, a 477 percent increase from last year.
Saudi Arabia has introduced new incentives for multinational companies to relocate their regional headquarters to the Kingdom through its Regional Headquarters Programme.
These incentives include a 30-year exemption from corporate income tax and withholding tax related to head office activities, as well as discounts and support services.
Notable companies that have opened regional headquarters in Saudi Arabia include Northern Trust, Bechtel and PepsiCo, as well as IHG Hotels and Resorts, PwC and Deloitte.
In June, PayerMax, a global provider of payment solutions, expanded its presence in Saudi Arabia by establishing its regional headquarters in Riyadh.
“We are excited to establish RHQ in Saudi Arabia. This is a strategic move to strengthen our presence in the region and demonstrates our long-term dedication to Saudi Arabia and the surrounding region,” said Wang Hu, co-founder of PayerMax.
That same month, multinational professional services firm EY decided to establish its regional headquarters in Riyadh, joining a growing number of international companies based in the city.
Abdulaziz Al Sowailim, chairman and CEO of EY MENA, said: “EY is proud to contribute to this innovative, cutting-edge strategy that will advance Saudi Arabia’s position as a pioneer both regionally and globally.”
Ramzi Darwish, Savills’ head of Saudi Arabia, cited a push to establish regional headquarters as a key reason for the city’s expected growth.
“A 30-year tax break for regional headquarters, a growing market and promising prospects are attracting international companies, reinforcing Riyadh’s position as a key regional hub for leading companies across a variety of industries,” he said.
Citing government data released earlier this month, the UK-based real estate consultancy highlighted that foreign direct investment into Saudi Arabia in the first quarter of this year increased 5.6 percent compared to the same period in 2023, reaching 9.5 billion Saudi riyals ($2.53 billion).
“Riyadh has seen a significant increase in business interest, with more than 180 foreign companies planning to set up their regional headquarters in the city in 2023, exceeding the initial target of 160. This growing confidence reflects the strong potential of the Saudi capital,” Darwish added.
In May, an S&P Global analysis highlighted that the opening of free economic zones and the regional headquarters program could boost foreign direct investment inflows into Saudi Arabia.
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.
In January, Saudi Arabia’s Minister of Economy and Planning, Faisal Al-Ibrahim, said Riyadh’s selection to host Expo 2030 underscored the country’s commitment to achieving sustainable economic and social development.
He added that the international event would further strengthen the country’s position as a world leader in business, tourism and innovation.
Additionally, a June report by Henley & Partners predicted that more than 300 billionaires will relocate to Saudi Arabia in 2024, with Riyadh and Jeddah becoming increasingly popular among the wealthy.
A global perspective
The Savills Growth Hubs Index, alongside the Resilient Cities Index, examines economic strength and projects trends out to 2033 to identify cities set to experience significant growth in wealth and economic expansion.
Cities in India and China lead the way with five each in the top 15, followed by Vietnam with two, the Philippines, Bangladesh and Saudi Arabia with one each.
The index takes into account gross domestic product projections through to 2033, future credit ratings at the country level, residents’ personal wealth, population growth and migration trends.
According to the report, Indian cities such as Bengaluru, Delhi, Hyderabad, Mumbai and Kolkata emerged among the top 15 growing cities.
Chinese cities on the list include Shenzhen, Guangzhou, Suzhou and Wuhan.
The Philippines’ capital, Manila, has also secured a location.
“Economically, cities in India and Bangladesh are expected to see 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 Savills World Research.
He added: “As global growth shifts further from West to East, the impact on urban real estate will increase. New innovation hubs will attract growing and expanding businesses, which will support demand for offices, manufacturing and logistics space, and housing.”
Tostevin further noted that rising personal wealth and disposable income will drive opportunities for new retail and leisure development in these expanding cities.
Savills highlighted Asia’s economic transformation, with an increasing focus on technology-led growth, as behind the dominance of the region’s cities in the rankings.
Tostevin also stressed that sustainable development, education and workforce growth are key factors shaping the city’s future growth.
“Today’s global growth centers will not automatically transform into tomorrow’s resilient cities. To do this, they need to consider their own paths to more environmentally sustainable development, improve education and workforce participation, and foster stable, transparent and liquid real estate markets,” he added.
The report also noted that many Asian cities will also record an expansion of their middle class, due to strong growth in personal wealth across the region.
The analysis added that Asia’s traditional manufacturing competitiveness will continue to drive growth in the region’s cities.
“Traditional manufacturing drivers cannot be ignored as they remain a major influence, particularly in areas where traditionally low-cost land and labour markets are becoming more expensive, forcing industry to consider relocating elsewhere,” said Simon Smith, Hong Kong-based senior director of research and consultancy at Savills.
Savills conducted the research using city- and metro-level data from Oxford Economics, specifically analysing cities with a GDP of over $50 billion.