Saudi Arabia’s economy is at a pivotal stage, where the Kingdom’s market is already witnessing tangible results of the Vision 2030 roadmap. This is marked by the influx of international and regional businesses entering the Saudi market to become key drivers of growth in their respective sectors.
Last month, we published our 2023 Saudi Market Entry Report, which analyzed and collected insight from 660 high-growth companies, from a total of 50+ countries around the globe and across 37 sectors, and provides a holistic view of various aspects pertaining to the Saudi business expansion journey.
The growth in business expansion activity in Saudi is primarily driven by its strong economic outlook and favorable governmental policies and initiatives that aim to attract global direct investments. Business setup companies play a pivotal role in supporting streamlined market entry processes for new entrants and finding their footing in the Kingdom.
There was a fourfold increase in business expansion activity in 2023, as indicated by a faster decision-making cycle in terms of expansion of two months in 2024 compared to 8–12 months in 2018. This speaks volumes about opportunities lying ahead for companies entering the Kingdom emerging from diverse sectors such as tourism, construction, IT, and sustainability, as well as the nation’s grand-scale infrastructure projects such as the giga and mega projects. Global events like the 2030 Riyadh Expo and the 2034 FIFA World Cup are opening up a plethora of opportunities for companies of different backgrounds that are ready to leverage first-move advantage and write the beginning of their own Saudi story.
Companies entering the Kingdom are faced with a large commercial opportunity, unlocking new paths to growth and profitability. This was evidenced by the findings of the market report, which showed that the overall size of businesses recently expanded to Saudi Arabia has increased by twofold. This comes closely in line with Vision 2030’s objective to grow the private sector’s share of GDP to 65% by 2030.
In this piece, we provide a complete analysis of the factors driving business expansion activity and their impact on drawing larger inflows of innovators from all corners of the world.
Expand your business to Saudi Arabia with AstroLabs
Rising Demand for Office Spaces in Saudi Arabia as Businesses Relocate
Ensuring the seamless relocation of employees and their families is a crucial aspect of a seamless business transition into Saudi. Our report showed that while 25% of the companies are yet to relocate their teams’ families, those who have undertaken this endeavor encountered challenges. Among those who have relocated their families, 65% rated the relocation process as challenging, emphasizing the importance of third-party partners in realizing better integration efforts.
Despite this, 35% of companies reported a relatively smooth relocation experience and that improvements can be made to expedite the team relocation expansion. This can include enhanced access to housing accommodations and securing schools for their children.
To that end, we partnered with Saudi-based relocation experts, EER and RelocateME, whose aim is to support teams making a move to Saudi Arabia and make the relocation experience more rewarding and positive.
With more employees shifting to Saudi, there’s a pressing need to provide office spaces. The massive increase in the number of businesses expanding to Saudi Arabia sparked the demand for office spaces, leading to an increase in rents as well. A report by real estate consultancy services CBRE showed that the occupancy rate of Grade A offices reached 100% in Riyadh, while occupancy rates for Grade B rested at 99.4%. It further showed that office space rents across all grades in Riyadh rose in 2023 due to increased demand from national and international occupiers.
“Average prime rents in Riyadh city increased by 20.7% in the 12 months leading up to the fourth quarter of 2023,” the report said, adding that average workplace rents in Riyadh for Grades A and B surged by 13% over the same period.
Notably, these trends underscore the growing demand for premium workplace environments, reflecting the expanding business landscape in Saudi Arabia. Securing the right office spaces suitable for the company’s particular business needs is essential for establishing a strong operational foothold in the Kingdom and supports the company’s current upward trajectory and growth path.
As highlighted in our market entry report, 50% of foreign businesses plan to have an office space in less than one year, while 18% are looking at moving into their own office in the next 3–6 months. Finding suitable office spaces remains a top priority for businesses expanding into the Kingdom.
Our private and co-working spaces in Riyadh have facilitated as a launchpad for many key leaders in Saudi, including Kitopi, Bayzat, Bayut, and Halian, among others. Having the right working conditions for employees stepping into a new market is paramount for the future success of companies looking to steer economic development in Saudi.
This was also highlighted by the CGO and co-founder of Kitopi, Bader Ataya, in a recent conversation with us, where he remarked, “They [AstroLabs] held our hand throughout the expansion journey… and to top it all off, they gave us an office space where the team was able to work rather than working in construction sites or kitchens as they had done in the other markets.”
Hiring Local Talent Remains A Top Business Priority
Tapping into the local talent pool has emerged as a strategic imperative for companies seeking to establish a strong presence in the Kingdom. Finding local champions who are well-versed in the market’s dynamics and needs as well as cultural aspects is a key cornerstone of any successful market entry strategy, with the majority of companies operating in Saudi recognizing the importance of hiring Saudi professionals.
A staggering number of businesses surveyed in our report, equivalent to 91%, have successfully onboarded Saudi nationals within a timeframe of 2-4 months from the time of their entry. Out of this 91%, 47.8%, completed the hiring process in less than a month, demonstrating the abundance of readily available talent in the local workforce.
Moreover, the remaining 43.5% of companies hired Saudi nationals within the 2-4 month timeframe, underscoring the efficiency and speed of the recruitment process and signifying a great demand for the local talent pool.
While companies are required to remain compliant with Saudization laws, there’s a deeper resonance beyond regulatory compliance. Businesses are increasingly recognizing the wealth of skills and expertise that local talent brings to the table, a key factor enhancing their ability to adapt, innovate, and thrive in the Saudi market.
Growing Business Interest in Saudi Arabia Despite Limited Expansion Readiness
The majority of companies operating in Saudi Arabia reported having a basic understanding of the market at the time of entry, but remain attracted by the lucrative economic opportunities presented by the market across sectors shaping the future of Saudi Arabia, from technology and sustainability to hospitality and beyond.
This highlights that the fervor and determination of these companies to contribute to the Kingdom’s development are palpable and underscores the resilience and adaptability of businesses venturing into the Saudi market. However, it also demonstrates the imperative need to bridge the gap between enthusiasm and readiness.
Establishing well-structured business networks and knowledge platforms emerges as a critical step in the Saudi market entry journey. To further support the integration of companies into the Kingdom’s economy and accelerate their expansion readiness, our AstroLabs Network platform has been formed to connect global and regional players with seasoned market experts to help them deepen their understanding of the Saudi landscape.
In essence, the growing enthusiasm among companies entering Saudi Arabia embodies a spirit of optimism and determination. It reflects a collective vision to contribute to the Kingdom’s growth story, leveraging opportunities and overcoming challenges along the way.