Saudi Arabia's retail market has witnessed substantial evolution, driven by the Kingdom's Vision 2030 economic diversification agenda, technological advancements, and changes in consumer behaviour. This shift reflects the broader goals outlined in a recent retail market report by Knight Frank for 2024, which highlights key developments and trends shaping the sector. With retail contributing nearly a quarter of the growth to the Kingdom's non-oil GDP, the sector now accounts for about 50% of the economic output, reaching approximately $476 billion last year.

Saudi Arabia is embracing digitalisation at an accelerated pace, a trend reflected in both the traditional point-of-sale (POS) systems and e-commerce channels. In 2023, these platforms experienced a combined growth of 13%, with the e-commerce sector alone expanding by 28% to reach a total of SAR 157 billion ($41.8 billion). These gains reflect the Kingdom’s high internet and smartphone penetration, as well as the government’s ongoing support for digital retail infrastructure. The total value of POS and e-commerce transactions hit SAR 770.9 billion ($206 billion), underscoring the retail sector’s expanding digital reach.

The Saudi government’s progressive stance on foreign direct investment (FDI) continues to strengthen the sector’s growth. Policies allowing 100% foreign ownership have attracted significant international interest, with 8,540 licences issued in 2023, a 96% increase compared to the previous year. This includes 186 licences dedicated to wholesale and retail trade. Consequently, FDI inflows grew by 12%, reaching SAR 72.3 billion ($19.3 billion) last year.

Despite these positive indicators, retail rental rates in major urban centres reflect a mixed performance. Over the past four years, shopping mall rents have gradually declined due to rising supply and the shift toward e-commerce, with Riyadh standing out as an exception. Riyadh has sustained relatively steady rental rates, averaging SAR 2,700 per square metre for super-regional malls in early 2024. The city has also seen an expansion in lifestyle and luxury retail destinations, with projects like Diriyah Square and Boulevard City boosting Riyadh’s profile as a high-end shopping hub. With 5.3 million square metres of retail space under development across the Kingdom, rental rates are expected to face continued downward pressure. In response to these trends, developers are increasingly integrating experiential elements into retail spaces, enhancing visitor engagement and extending shopping durations.

The cities of Jeddah and the Dammam Metropolitan Area (DMA) are also seeing similar trends, with notable new lifestyle developments. Jeddah has added 42,000 square metres of new retail space in the last 18 months, with a further 131,700 square metres expected within the next year. However, average mall rents in Jeddah decreased by 7% year-over-year, with occupancy dropping slightly to 84%. The DMA’s rental rates also dipped slightly, reflecting a more competitive landscape as new retail and entertainment projects continue to emerge.

As Saudi Arabia’s retail market continues to expand, businesses are utilising data-driven strategies to align with evolving consumer preferences. Access to reliable data allows stakeholders to make informed decisions on store placements, tenant mixes, and omnichannel strategies that optimise profitability. This strategic approach, crucial for a fast-changing market, equips retailers and investors to maximise returns while adapting to new consumer demands.

The future of Saudi Arabia’s retail market looks promising, supported by government initiatives, digital growth, and an increasing focus on lifestyle-oriented retail spaces. To support this transformative journey and explore its potential, Retail Show 2025 will serve as a pivotal event, connecting the industry’s key players and offering a platform for deeper insights into the Kingdom's evolving retail landscape. This event will bring together retailers, investors, and thought leaders to discuss strategies that align with Vision 2030, showcasing how industry innovations, data-driven approaches, and experiential retail can drive growth in a fast-changing market. By attending Retail Show 2025, businesses and investors can gain valuable perspectives on emerging trends and opportunities that are shaping Saudi Arabia's retail future.

The sector’s evolving landscape reflects broader global trends, positioning Saudi Arabia as an increasingly attractive market for local and international stakeholders alike. While rental compression and shifts in consumer preferences present challenges, the industry’s commitment to innovation and lifestyle-driven development offers a strong foundation for sustained growth.