How to Do a Real Estate Feasibility Study in Saudi Arabia (Step-by-Step)
A development feasibility study answers one question: does this plot, with this use, at this price, make money? In the Saudi market — where well-located land attracts competing interest within days — the ability to answer quickly is as important as answering correctly. Here's the full process, with current KSA benchmarks.
Step 1: Define the development scenario
Fix the basics before touching a spreadsheet: plot area, permitted FAR (floor area ratio) under the zoning, intended use class, and gross-to-leasable efficiency. In Saudi cities, zoning and FAR are increasingly accessible through municipal platforms; efficiency for office and residential towers typically runs 75–85%.
Step 2: Establish revenue assumptions — with sources
This is where most feasibility studies quietly fail: a rent number without a source is an opinion. Current Riyadh benchmarks illustrate the range you should be working with:
- Grade A office prime rent: SAR 3,630/m²/yr (JLL, Q1 2026), against a Knight Frank Grade A average of SAR 2,750 — always carry the range, not one number
- Grade A office occupancy: ~99% (CBRE, Q4 2025)
- Mid-rise residential rent: roughly SAR 1,300/m²/yr as a working benchmark
Whatever figures you use, record the publisher and the date. Assumptions age fast in this market.
Step 3: Build the cost stack
Construction cost per m² of GFA varies by typology. Current KSA working benchmarks: high-rise Grade A office around SAR 9,000/m²; mid-rise residential around SAR 6,500/m²; prime retail SAR 10,000/m². Add professional fees (typically 8–12% of construction), contingency (5–10%), and finance costs over the build period.
Step 4: Capitalise the income
For income-producing schemes: NOI = stabilised rent × occupancy − operating costs, then divide by the cap rate. Saudi cap rates currently cluster around 7.0% for office and 7.5% for residential and retail. Worked example for Riyadh Grade A office: 3,630 × 99% − 350 opex ≈ SAR 3,244/m² NOI → ÷ 7% ≈ SAR 46,300/m² of capitalised value per leasable metre.
Step 5: Solve for residual land value
Residual land value = capitalised (or sales) value − total development cost − required developer profit. This is the maximum you can rationally bid for the plot. If the asking price exceeds the residual, the deal only works if one of your assumptions improves — and you should know which one, and by how much, before negotiating.
Step 6: Test alternative uses
The first use that comes to mind is rarely the highest and best one. A plot penciling poorly as office may work as serviced apartments or mixed-use. Testing five scenarios manually takes days; this is exactly what PlotIQ's feasibility engine automates — 13 use classes, sourced default assumptions you can override, and a working Excel model out the other end.
Frequently asked questions
How long does a feasibility study take in Saudi Arabia?
A full advisory engagement typically runs 2–3 weeks. A first-pass screening with benchmark assumptions can be done in minutes with the right tooling — most developers now do a rapid screen first and commission full studies only on plots that pass.
What cap rate should I use for Riyadh?
Current working benchmarks: ~7.0% for Grade A office, ~7.5% for residential and retail. Always sanity-check against recent income-producing transactions in the specific submarket.
What does a feasibility study cost?
Advisory feasibility studies in the GCC are typically quoted in the tens of thousands of riyals depending on scope. Screening tools like PlotIQ are free during early access.
Run the six steps above on a real plot in under 10 minutes: plotiq.io — free, no login.