RIYADH: Saudi Arabia’s capital is projected to be amongst the top 15 fastest-growing cities by 2033, driven by a 26 percent population increase and continued government infrastructure spending.
According to the Savills Growth Hubs Index, Riyadh is the only non-Asian city on the list, with its growth linked to a population surge from 5.9 million to 9.2 million over the next 10 years, necessitating enhanced amenities and services.
This aligns with Saudi Arabia’s Vision 2030 program, which aims to develop Riyadh as a residential and business hub while diversifying the economy and reducing dependency on oil.
Richard Paul, head of professional services & consultancy at Savills Middle East, said: “Saudi Arabia boasts a population of around 36 million people and, astonishingly, 67 percent are under the age of 35. The employment potential and ultimate spending power of this segment of the population over the next decade are enormous.”
The Savills report noted Riyadh’s office market is bolstered by regional headquarters demand, and tourism growth is driving retail sector demand near popular tourist destinations.
The city’s business development sector saw over 120 international firms relocate their regional headquarters to Saudi Arabia in the first quarter, marking a 477 percent year-on-year increase.
Through the regional HQ program, Saudi Arabia introduced new incentives for multinational companies moving their regional headquarters to the Kingdom.
These incentives include a 30-year exemption on corporate income tax and withholding tax related to headquarters activities, alongside discounts and support services.
Some of the prominent firms that opened their 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 provider of payment solutions, expanded its presence in the Kingdom by establishing its regional headquarters in Riyadh.
“We are thrilled to establish our RHQ in Saudi Arabia, which signifies 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 at PayerMax.
In the same month, multinational professional services firm EY decided to establish its regional headquarters in Riyadh, joining a growing roster of international companies in the city.
Abdulaziz Al-Sowailim, EY MENA chairman and CEO, said: “EY is proud to be playing a part in the innovative and cutting-edge strategies that are elevating KSA’s position as a trailblazer, both regionally and globally.”
Ramzi Darwish, head of Savills in Saudi Arabia, cited the regional headquarters drive as key reason for the city’s anticipated growth.
“The 30-year tax relief for regional headquarters, expanding market, and promising prospects are attracting international companies and reinforcing Riyadh’s position as a vital regional hub for leading businesses across diverse industries,” he said.
Citing government data released earlier this month, the UK-based real estate consultancy firm highlighted that foreign direct investment into the Kingdom surged by 5.6 percent in the first quarter of this year to SR9.5 billion ($2.53 billion), compared to the same period in 2023.
“Riyadh is experiencing a remarkable surge in corporate interest, with over 180 foreign companies establishing their regional headquarters in the city in 2023, surpassing the initial target of 160. This growing confidence reflects the robust 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 foreign direct investment inflows into the Kingdom.
Earlier this year, Saudi Arabia’s Small and Medium Enterprises General Authority also emphasized that the program has significantly boosted Riyadh’s economic growth.
In January, Saudi Minister of Economy and Planning, Faisal Al-Ibrahim, noted that Riyadh’s successful bid to host EXPO 2030 underscores the Kingdom’s commitment to achieving sustainable economic and social development.
He added that the international event will further strengthen the country’s position as a leading global destination for business, tourism, and innovation.
Additionally, a report released by Henley & Partners in June projected that over 300 millionaires will move to Saudi Arabia in 2024, with Riyadh and Jeddah becoming increasingly popular among high-net-worth individuals.
Global perspectives
The Savills Growth Hubs Index, alongside the Resilient Cities Index, examines economic strength and forecasts trends up to 2033 to identify cities experiencing high growth in wealth and economic expansion.
Indian and Chinese cities dominate with five spots each in the top 15, followed by Vietnam with two, and the Philippines, Bangladesh, and Saudi Arabia with one each.
The index factors in projected gross domestic product by 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 emerged among the top 15 growing cities.
Chinese cities making their entry to the list include Shenzhen, Guangzhou, Suzhou, and Wuhan.
Manila, the capital of the Philippines, has also secured a place.
“In economic terms, cities in India and Bangladesh are set to average GDP growth of 68 percent between 2023 and 2033, followed by those 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 pivots further from west to east, the real estate implications for cities multiply. The new centers of innovation will become magnets for growing and scaling businesses, and this will underpin demand for offices, manufacturing and logistics space, and homes.”
Tostevin further pointed out that increasing personal wealth and disposable incomes will drive opportunities for new retail and leisure developments in these expanding cities.
Savills emphasized that Asia’s economic transformation, with its growing focus on technology-driven growth, underlies the dominance of the region’s cities in the rankings.
Tostevin also highlighted that sustainable development, education, and labor growth are crucial factors that will shape the future growth of cities.
“Today’s global growth hubs won’t automatically turn into tomorrow’s Resilient Cities. For this, they’ll need to consider their own pathways to more environmentally sustainable development and improve education and labor force participation. They’ll also need to facilitate stable, transparent, and liquid real estate markets,” he added.
The report further noted that a large proportion of Asian cities are also set to record 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 the growth of the cities in the region.
“You wouldn’t want to overlook traditional manufacturing drivers. They’re 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, senior director of research & consultancy at Savills, based in Hong Kong.
Savills conducted the study using city-metro level data from Oxford Economics, specifically analyzing cities with a GDP exceeding $50 billion.
