RIYADH: The King Abdullah Financial District (KAFD) is too big for the local market, and will cause a glut in office space and accommodations once it becomes operational and tenants start moving in.
鈥淚n fact, some of the buildings at the northern portion of the $11.6 billion financial district have been canceled,鈥� said a source working for one of the companies involved in the project.
He said that this is expected because many of the 112 multi-storey buildings that have been constructed were not part of the original plan.
A foreign magazine earlier critisized the project, saying that KAFD is a 鈥渟ober alternative to Dubai鈥檚 exuberant international financial center.鈥�
But oversupply in office space and accommodation is not the only problem facing the sprawling project which is located in a 1.6 million sq. meter area in the northern part of the Saudi capital.
鈥淭he rent is also exorbitant. This is probably because of the huge capital that has been invested to develop and construct the project,鈥� said the general manager of a construction and landscaping firm.
He added that the rent per sq. meter is estimated at SR3,000 to SR4,000, 鈥渨hich is quite high for many local firms which are interested to have their offices at KAFD.鈥�
Because of the high rent, the rent outside the financial district has also doubled.
But despite the exorbitant cost, there are companies which intend to establish their head offices inside the financial district. For this purpose, the head of an investment bank in the UAE visited the Saudi capital sometime back.
鈥淚f you鈥檙e not inside the financial district, you鈥檒l be left behind by the competitors who are already established in the market. They will likely move in at the opportune time,鈥� he added.