Resilient consumer spending in Saudi Arabia is underpinning demand for retail real estate, with spending holding up in the first quarter despite regional geopolitical tension and rising 6.8% year-on-year to SR425bn ($113bn), according to property consultancy Knight Frank.

The figure, which covers point-of-sale transactions, cash withdrawals and e-commerce purchases, builds on the SR1.57tn ($419bn) spent through official payment channels in 2025.

The consultancy said the wider economy expanded by 3% in Q1, driven by 2.9% growth in non-oil activities, while inflation held at 1.8%.

E-commerce spending rose 42% year-on-year to SR98.4bn ($26bn), and point-of-sale spending increased 4.4% to SR189.7bn ($51bn). Cash withdrawals fell 7% to SR136.8bn ($36bn), which Knight Frank said reflected a continued shift towards cashless and omni-channel payment.

Discretionary categories led the growth. Jewellery recorded a 47% rise in point-of-sale transactions, followed by clothing and accessories at 25.9% and telecommunications at 23%.

Fundamentals stable

Retail fundamentals were broadly stable across the kingdom's three largest metropolitan areas in the first half of 2026.

In Riyadh, average lease rates for regional and super-regional malls rose 1.2% year-on-year to SR2,650 a square metre, with occupancy stable at 91%. Occupancy improved to 88% in Jeddah despite a modest easing in headline rents as new supply entered the market, and reached 94% in the Dammam Metropolitan Area.

Retail stock has reached about 4.2 million square metres in Riyadh, 3 million square metres in Jeddah and 1.4 million square metres in the Dammam Metropolitan Area. Knight Frank said much of the development pipeline was focused on mixed-use, lifestyle-led schemes combining retail, hospitality, entertainment and leisure.

F&B demand

Food and beverage operators remain among the most active occupiers in the market, with the consultancy pointing to demand for health-focused, convenience-led and affordable casual dining formats.

Knight Frank also said rising construction costs were creating a growing distinction between existing retail assets and new developments. He said developers faced three choices: reduce build quality to stay aligned with prevailing rents, deliver premium schemes commanding higher lease rates, or create high-quality destinations that justify established rents through stronger footfall and tenant sales.

Lifestyle segment

Riyadh's lifestyle retail market has reached about 485,000 square metres across 28 developments, with occupancy averaging 96%. Food and beverage operators account for about 76% of tenants across these schemes, spanning more than 434 restaurants and cafes.

Jeddah's lifestyle retail sector comprises about 291,000 square metres across 19 developments, with a further 277,600 square metres expected by 2029.