Healthcare In Saudi Arabia - Knight Frank

HEALTHCARE IN SAUDI ARABIA OPPORTUNITIES IN THE LONG-TERM CARE SECTOR OCTOBER 2019Market stakeholders views on LTC sector“Gaps still exist for the provision of long-term care facilities in Saudi Arabia, and will continue until the required number of beds are met. Thesuccess of NMC’s Chronic Care Specialist Medical Center Hospital in Jeddah, is evidence of requirement for quality providers of long-termcare in the Kingdom. NMC intends to continue to source ways in which to fill the gap, particularly through brownfield and greenfield expansionprojects in areas where the most need exists.”Michael Davis, COO of NMC Healthcare“The number of hospital beds utilised as long-term care in the Ministry of Health was reported to be around 4,500 according to 2017statistics. This number is expected to increase due to the changes in age group as well as the increased number of reported traffic accidentsthat result in disabled patients. Other non-MoH healthcare providers utilise around 1,200 beds of long-term care.The 65 Saudi population was estimated to be 900,000 in 2018 and this number will increase to 1.4 million in 2022, and to 2.5 million by2030. As per the international benchmark of LTC beds, Saudi Arabia is heading to a gap in excess of 12,000 beds, based on the currentlyavailable LTC beds.”Dr. Turki M. Alanazi, CEO of Family Care Hospital, Member of the National Health Committee - CSCIt is evident that there is an unmet demandin the LTC sector. Excluding the additionalsupply of 2,000 beds under the PPPscheme, the bare minimum requirementas per our research is at least 7,000 bedsand, as per stakeholder insights, demandstands between 10,000 and 13,000 beds,as presented in Figure 6.Demand growth rates will continue toaccelerate as the over 60s population isexpected to increase by 3 times between2018 and 2035 (Figure 7). This would resultin demand for additional specialisationswithin the LTC sector due to the burdenof chronic diseases, which leads todegenerative and debilitating illnesses in thegeriatric segment.FIGURE 6Estimated demand for LTC 0004,0007,00010,00013,0002,0000Low range of experts estimateBased on beds blockedBeds demandedHigh range of experts estimatePPP-supplySource: Knight Frank ResearchFIGURE 7Shift in KSA population age groups by 203533.6 m203520181.1x1.0x1.4x3.0x7,0000-19 years20-39 years40-59 years60 years41.3 m6,000Population, thousandsConclusion:Value 30-3940-49Age groupsSource: United Nations50-5960-6970-7980

KINGDOM OF SAUDI ARABIA5,000Stefan Burch, MRICSGeneral Manager & Partner 966 53 0893 297stefan.burch@me.knightfrank.comSaud SulaymaniPartner, Valuation & Advisory 966 55 8838 883saud.sulaymani@me.knightfrank.comHEALTHCARE & EDUCATIONShehzad JamalPartner 971 56 4101 298shehzad.jamal@me.knightfrank.comRECENT MARKET-LEADING RESEARCH PUBLICATIONSRESEARCH2019HEALTHCARE IN SAUDI ARABIAOPPORTUNITIES IN THE SECTOR MAY 2018Key findingsDemand for healthcare in Saudi Arabiais set to continue growing triggered bya demographic shift and an increase inhealth insurance coverage.Forecasted demand gap due topopulation growth and facilitiesrequirements, create a business casefor the development of additionalfacilities in Saudi Arabia.In the context of growing healthcaredemand, government initiatives call fora greater participation of the privatesector in healthcare as highlighted inthe National Transformation Plan (NTP)and the recent privatisation plan.OpportunitiesTaking a closer look at the SaudiArabian healthcare market, we notethat the prevailing picture is one thatoffers a number of opportunities toexisting operators / investors and newentrants, hence the possibility to unlocka significant growth potential by fulfillingexisting and future gaps.Saudi Arabia has a young populationwith approximately 70% below the ageof 40 years, and health services havebeen planned based on this demographicprofile. If we fast-forward to 2035, thepopulation would still be consideredyoung, despite a significant change inhealthcare demand dynamics:DR. GIREESH KUMAR“Over the next decade,population dynamics areforecast to shift with asignificant increase in thepopulation over 40. Thisindicates an expectedincrease in the burden oflifestyle diseases and theassociated co-morbiditieswhich would trigger anupsurge in demand for highlyspecialised medical andsurgical care in the Kingdom.”SAUDI ARABIA RESIDENTIALMARKET REVIEW 2019Investing in alternative real estate asset classes such as healthcare is agrowing trend among global and local investors seeking diversificationbenefits as well as long term stability given the defensive nature of theunderlying income stream. In Saudi Arabia, rising demand for healthcareand government initiatives favouring an increased participation from theprivate sector look set to drive expansion in the sector and open newdoors for investors.With 44% of the population over the ageof 40 and 14% over the age of 60 in 2035,requirements for healthcare services willbroaden. With such a population mixthere will be increased demand for healthservices such as: Care related to lifestyle and noncommunicable diseases; as thesediseases normally start developingwhen people reach their 40s, such ascardiovascular, diabetes, obesity andrheumatoid arthritis. Geriatric related care, rehabilitation,home healthcare and specialisedhealthcare services as immunity andactivity beyond the age of 60 aregenerally low. Proactive healthcare, antiagingservices and regenerative medicine,as generation X, Y and Z are relativelymore health aware and conscious oftheir appearances.PopulationSenior Manager, HealthcareRESIDENTIAL RESEARCH Population between the ages of 40 and59 will increase by 1.5 times in SaudiArabia. Population over the age of 60 isforecast to increase by more than 3times in Saudi Arabia. (Figure 1)Key findingsIn the first half of 2019, prices appearto have remained under pressure whiletransaction volumes have picked upsignificantly across the key cities, indicatingthat the market may be heading towardsthe bottom of its cycle.With a growing urban population anda mismatch in the provision of housingstock to low to middle tier buyers,housing affordability in Saudi Arabia is arising challenge. The Sakani affordablehousing scheme and the efforts toexpand the mortgage market areexpected to alleviate pressures in thisarea.Despite challenging market conditions,we remain encouraged by the variousgovernment initiatives aimed atboosting Saudi home ownership andby the government focus on the realestate sector as part of the economicdiversification process.The residential market continued to soften in 2018 as highlighted by lower levels oftransactions and a correction in rental and sales prices across the major cities in SaudiArabia. In the first half of 2019, prices appear to have remained under pressure whiletransactions volumes have picked up significantly across the key cities, indicating that themarket may be heading towards the bottom of its cycle.The trend towards a weaker residential market was initially triggered by the economicslowdown that started to be felt in 2016; so far, the sector has failed to recover. Acombination of factors has prolonged the downturn namely the departure of expatriatesfrom the Kingdom, continuing affordability challenges and the lack of stock targeted atlower to middle tier buyers.URBAN FUTURESDespite current headwinds, drivers for the market appear to be positive for the longerterm. The government focus on the real estate sector as part of the diversification processof the economy is seen as a catalyst for a more active residential market over the comingyears. Moreover, the various urban regeneration initiatives, which are underway, areexpected to play a vital role in responding to changing demand dynamics.Raya MajdalaniResearch Manager 971 56 4206 735raya.majdalani@me.knightfrank.comAFFORDABLE LIVING SOLUTIONS FOR ECONOMIC LONGEVIT YSAUDI ARABIA EDITION — 1FIGURE 1Increase real estate sector growth to7% per year by 20202019Increase the size of the mortgagemarket to SAR 500 billion by 2020Increase Saudi home ownership from47% to 52% by 2020 and 70% by 2030RAYA MAJDALANIDouble the real estate contributionto GDP to reach 10% by 2020Research ManagerDemographic Shift (2017-2035 Multipliers)4.03.53.02.52.01.50.50Saudi ArabiaRiyadhSource: Oxford EconomicsJeddah0-19 yearsMakkah20-39 yearsMadinah40-59 years60 yearsPlease refer to the important noticeat the end of this reportSource: Knight Frank Research, NTP, Ministry ofHousingFIGURE 2FIGURE 3Government spendingSAR 930 bn2017Government revenuesSAR 1,030 bn2018SAR 1,120 bn2019FSAR 692 bn2017SAR 895 bn2018SAR 893 bn2019FSource: Knight Frank Research, IMF economicoutlook database April 2019 edition, SAMASource: Knight Frank Research, IMF economicoutlook database April 2019 edition, SAMA1Healthcare in SaudiArabia 2018Saudi Arabia ResidentialMarket Review 2019Urban Futures - SaudiArabia edition 1RESEARCHRESEARCHKey findingsSAUDI ARABIA OFFICEMARKET REVIEW 2018SAUDI ARABIAThe implementation of the Riyadh Metrofalls in line with the rapid expansionof population and urbanisation whichcalls for the establishment of masstransportation systems in the capitalcityMARKET REVIEW & FORECAST2019The opening of the Riyadh Metro isset to help drive real estate demandacross the capital as well as revivingneighbourhoods which have historicallybeen classed as secondary locationsWhilst it is too early to quantify theeffect on real estate values, an analysisof international benchmarks shows thatmass transit systems have the potentialto be a strong driver for growth as aresult of improved connectivityIntroductionKey findingsFollowing Saudi Arabia’s rapid population growth, which has increased from 27.6 millionin 2010 to 32.6 million, urban centres across the Kingdom have seen correspondingexpansion. The United Nations currently estimates that 84% of the Kingdom’s populationreside in urban centres, up from 45% five decades earlier - in numerical terms thisequates to 27.3 million urban residents in 2018 compared to 2.4 million in 1968. With thisrate of expansion and urbanisation comes the need for cities to adapt to changing marketdynamics and occupier demands. In the short to medium term, we believe that urbanregeneration will need to play an increasingly important role across Saudi Arabia.In Saudi Arabia, market wide rents andoccupancy levels have been underpressure since 2016, with the trendcontinuing into 2018 amid increasinglevels of supply and subdued occupierdemand.Prime office schemes have beenoutperforming the market as a resultof a historic lack of quality stock. Amajor headwind is that a large portionof upcoming supply falls within thiscategory, which could put pressure onperformance in this segment.Recently introduced strategic reforms aimed at creating a favourable environment forinvestment and strengthening the non-oil sector have placed a focus on real estate whichis forecast to double its contribution to economic output throughout the period to 2030.Moreover the implementation of various urban regeneration initiatives including mixed usecommunities and large scale infrastructure projects are expected to act as catalysts forthe real estate market.Although there was an improvementin business sentiment in 2018, on theback of higher oil prices, this has yetto result in an increase in demand foroffice accommodation across majorcities.The Riyadh Metro is one of the key infrastructure projects that is being implementedand which is set to dramatically alter the dynamics of both residential and commercialreal estate markets when delivered. Whilst it is too early to quantify the effect on capitalvalues, land values and rental rates, an analysis of international benchmarks shows thatmass transit systems have the potential to be a strong driver for growth as a result ofimproved connectivity.Long term demand drivers include: anacceleration of growth in the nonoil sector, an increasingly attractivebusiness environment for globaloccupiers and the implementation ofvarious urban regeneration initiatives.FIGURE 1Riyadh MetroKING KHALIDINTERNATIONALAIRPORT (RUH)Blue Line: Olaya - Batha’a,38 km distanceRed Line: King Abdullah Road,25.3 km distanceOrange Line: Al Madina Al Monawara - Prince Saad binAbdual Rahman Al Awal road, 40.7 km distanceKING ABDULLAH FINANCIALDISTRICT (KAFD)RAYA MAJDALANIWhilst there have been a number of notable commercial officetransactions throughout 2018, as key occupiers both from the publicand private sector look to expand or move to upgraded premises, themarket continues to be dominated by a lack of Grade A stock and alarge supply pipeline.In terms of performance, market widerents and occupancy levels have beenunder pressure since 2016, with the trendcontinuing into 2018 amid increasinglevels of supply and subdued occupierdemand. Key prime schemes continuedto perform better than the market averageas a result of a lack of high quality stock.However as new schemes are releasedinto the market this trend is unlikely topersist over the long term.be expected to rise placing downwardpressure on rents. In this context, weexpect landlords to continue offeringincentives in order to maintain occupancylevels amid an increasingly competitivemarket.Longer term, we see demand for officespace picking up from current levels aseconomic reforms under the NationalTransformation Plan (NTP) and Vision 2030start feeding through the wider economy,translating into an acceleration of growthin the non-oil private sector.Against the backdrop of a highly elasticsupply dynamic, we see rents for GradeB assets softening further in the shortterm where buildings that suffer from pooraccessibility and parking arrangementswill struggle for occupancy.Moreover, the implementation of variousurban regeneration initiatives includingmixed use communities and large scaleinfrastructure projects, is expected to actas a catalyst for the real estate market.Although we have seen an improvementin business sentiment in 2018, we believethat any increase in demand will remainsubdued in the short term, with rents andoccupancy likely to remain under pressureas increased demand will be met withnew supply. Vacancy rates can thereforeFurthermore, it is expected that theplanned wave of privatisation will boostinvestment and foster growth in thebusiness environment creating favourableconditions for the office sector.Yellow Line: King Khaled International Airport Road,29.6 km distanceResearch ManagerGreen Line: King Abdul Aziz Road,12.9 km distance“The Riyadh Metro is setto have a marked effectin relation to real estatedynamics and the abilityto spur meaningful urbanregeneration.”FIGURE 1Selected NTP targets in relation with the real estate sectorPurple Line: Abdul Rahman bin Aouf road Sheikh Hassan bin Hussain bin Ali road, 30 km distanceKey stationsSAUD SULAYMANIAL HAMRAKINGDOMCENTRETOWERKING SAUDUNIVERSITYFAISALIAHTOWERAL OLAYAPartner, Saudi ArabiaAN NASIMASH SHARQI“The implementation of variousurban regeneration programs,mixed use communities, andlarge scale infrastructureprojects is expected to act asa catalyst for the real estatemarket in the Kingdom.”AL MANARKHASHM AL ANKING FAISALHOSPITALQASR AL HOKMIncrease the realestate sector growthto 7% per year upfrom 4%AS SULAYNATIONALMUSEUMAL MISHALMURABBAPALACEIncrease the private sectorcontribution from 40% to 65%of GDP with particular focus onthe real estate sectorx2Double the real estatecontribution to GDPfrom 5% to reach10% by 2020Source: Knight Frank ResearchFIGURE 2Brent Crude Oil, Spot (in USD)14012010080604020WESTERNTHE ANNUAL REVIEW AND FORECAST OF THE SAUDI ARABIAN REAL ESTATE MARKETSaudi Arabia RealEstate Market Review& Forecast 2019The Riyadh MetroQ3 2018Q4 2017Q1 2018Q2 2018Q1 2017Q2 2017Q3 2017Q3 2016Q4 2016Q4 2015Q1 2016Q2 2016Q2 2015Q3 2015Q3 2014Q4 2014Q1 2015Q1 2014Q2 2014Q2 2013Q3 2013Q4 2013Q4 2012Q1 20130Please refer to the important noticeat the end of this report.Source: Knight Frank Research, Riyadh Metro websiteQ3 2012Please refer to the important notice at theend of this report.VALUATION & ADVISORY SERVICESStephen Flanagan, MRICSPartner 971 50 8133 402stephen.flanagan@me.knightfrank.comCAPITAL MARKETS / INVESTMENTCOMMERCIAL RESEARCHTHE RIYADH METROTHE IMPACT OF NEW INFRASTRUCTURE ON REAL ESTATE VALUES JUNE 2018Maria KuzminaSenior Consultant 971 50 6686 028maria.kuzmina@me.knightfrank.comRESEARCHThe main target of the government is to increase Saudi home ownership to 52% by 2020and 70% by 2030. Various initiatives are underway to get Saudi nationals on the housingproperty ladder. The Sakani affordable housing program, which is now in its third year, andthe various regulatory efforts to expand the mortgage market are a case in point.Key government targets in relation to the real estate sector“The residential market remainsunder pressure as the risingaffordability challenge and thelack of suitable supply for middleand lower tier buyers continue toweigh on the sector. In H1 2019we have seen a significant pickup in transaction volumes acrosskey cities which indicates that themarket may be heading towardsthe bottom of its cycle.”FIGURE 11.0Please refer to the important noticeat the end of this report.IntroductionDr. Gireesh KumarSenior Manager 971 56 4845 490gireesh.kumar@me.knightfrank.comSource: MacrobondJoseph Morris, MRICSPartner 971 50 5036 351joseph.morris@me.knightfrank.comMEDIA & MARKETINGNicola MiltonHead of Middle East Marketing 971 56 6116 368nicola.milton@me.knightfrank.comSaudi Arabia OfficeMarket Review 2018The global perspective on prime property and investmentImportant NoticeTHE WEALTH REPORT 2019T H ER E P O R T2 0 1 9Research Highlightsknightfrank.com/activecapitalMakkah Hospitality2018Active Capital 2019The Wealth Report2019Knight Frank Research Reports are available at KnightFrank.com/ResearchRegional offices in:Botswana Kenya Malawi Nigeria Rwanda Saudi Arabia South AfricaTanzania UAE Uganda Zambia Zimbabwe Knight Frank 2019 - This report is publishedfor general information only and not to be reliedupon in any way. Although high standards havebeen used in the preparation of the information,analysis, views and projections presented in thisreport, no responsibility or liability whatsoevercan be accepted by Knight Frank for any loss ordamage resultant from any use of, reliance on orreference to the contents of this document. As ageneral report, this material does not necessarilyrepresent the view of Knight Frank in relation toparticular properties or projects. Reproduction ofthis report in whole or in part is not allowed withoutprior written approval of Knight Frank to the formand content within which it appears.Knight Frank Middle East Limited (Saudi ArabiaBranch) is a foreign branch registered in SaudiArabia with registration number 1010432042. Ourregistered office is located on the 1st floor, BuildingWH01, Al Raidah Digital City, Riyadh, Kingdom ofSaudi Arabia.

insurance in Saudi Arabia and the enforcement of the law are expected to translate into an increase in the number of beneficiaries and a wider utilisation of medical services at private healthcare facilities. As of August 2019, there were 26 insurance companies operating in Saudi Arabia