In February 2021, Saudi Arabia told the world’s largest companies: move your regional headquarters to Riyadh or lose access to government contracts. The ultimatum was dismissed as posturing. It was not posturing. By January 2026, the Ministry of Investment had issued more than 700 Regional Headquarters licences — surpassing the original Vision 2030 target of 480 by nearly 50 per cent. The number was presented as a triumph of policy. It was also, in the precision of its wording, a careful selection of metric: licences issued is not the same as offices opened, and offices opened is not the same as operations relocated.
Approximately 350 RHQs have actually begun operations in the Kingdom. Ninety per cent are in Riyadh. The gap between 700 licences and 350 operational headquarters — a 50 per cent conversion rate — describes a programme in which half the announced participants exist on paper but not in practice. The gap is the distance between compliance and commitment, between a licence filed to retain access to government contracts and a genuine relocation of decision-making, talent, and institutional weight.
Two years into enforcement, the Riyadh mandate has produced real results, real friction, and a quiet retreat from the absolutism that made it effective. The follow-up reveals a programme that succeeded in moving bodies but has not yet succeeded in moving minds — and that is discovering, in real time, the limits of coercive economic development.
The Shell Office Problem
The Saudi government anticipated the shell office problem. The regulations require a minimum of 15 full-time employees within the first operational year, at least three C-suite executives relocated to Riyadh, board meetings held in the Kingdom, and operational expenditure proportionate to declared activities. The fine for being non-operational is 400,000 riyals — approximately $107,000.
The regulations are specific. The workarounds are creative. At least one major Wall Street bank was reported to be actively searching for loopholes in the mandate, according to Semafor. The most common strategy is not to evade the mandate but to redefine what “regional” means. Companies are splitting their Middle East operations into two sub-regions: one centred on Riyadh (covering Saudi Arabia, Bahrain, and Oman) and one centred on Dubai (covering the UAE, Kuwait, and Qatar). The structure satisfies the Saudi requirement — the Riyadh office is the “regional headquarters” for its sub-region — while preserving Dubai as the operational hub for the broader Gulf.
Visa Inc. executed this strategy publicly in January 2026, splitting its Middle East operations to create a Riyadh-based unit covering Saudi Arabia, Bahrain, and Oman while maintaining Dubai for the UAE, Kuwait, and Qatar. The structure is compliant. It is also transparent about its purpose: the company established a headquarters in Riyadh because Saudi Arabia required it, not because Riyadh is the optimal location for managing a Middle East business. The distinction matters because it determines whether the mandate is building a genuine business capital or a compliance infrastructure — a city of headquarters or a city of brass plates.
The Enforcement Retreat
In a significant signal that the mandate was proving too rigid for the government’s own procurement needs, Saudi Arabia introduced exemptions in late 2025. Government entities can now contract with companies that do not hold an RHQ licence if the project value is under 1 million riyals ($267,000), if the non-RHQ company’s bid is at least 25 per cent cheaper than the next-best RHQ-holding competitor, or if only one technically compliant bid has been submitted. Projects outside the Kingdom are exempt entirely. Exemptions are processed through the Etimad digital platform.
The 25 per cent pricing exemption is the most consequential. It acknowledges, implicitly, that the mandate was raising procurement costs — that companies with RHQ licences were, in some cases, charging a premium that reflected the cost of maintaining a Riyadh presence, and that government entities were paying more for the same services because the mandate restricted the pool of eligible contractors.
The exemptions represent a quiet retreat from the absolute enforcement that gave the mandate its teeth. The original message was binary: move to Riyadh or lose government business. The revised message is: move to Riyadh, or be 25 per cent cheaper than someone who did. The revision is pragmatic. It is also a concession that the mandate’s rigidity was creating costs that the government itself was unwilling to absorb.
The Office Space Crisis
The mandate created demand for Riyadh office space that the market was not prepared to supply. The results are visible in the numbers.
Prime Riyadh office vacancy: 0.5 per cent as of the second quarter of 2025. Grade A overall: 3.8 per cent vacancy, effectively 98 per cent occupied when premium locations are measured. Grade B: 95 per cent occupied. The market is full.
Rents have responded accordingly. Grade A office rents increased 23 to 31 per cent year-on-year by various measures. Grade B rents rose 16.5 to 27 per cent. Prime rents reached 3,630 riyals ($967) per square metre per year in the second quarter of 2025.
Riyadh’s total office stock was 8.1 million square metres in mid-2025, with approximately 900,000 to 1 million square metres of new Grade A space expected by the end of 2026 — from Diriyah Gate, Misk City, and KAFD Phase 3 (a $2.6 billion expansion). Saudi-wide office stock is projected to grow from 9.7 million to 15 million square metres by 2028. Riyadh is adding ten times as much office space as Dubai.
KAFD — the King Abdullah Financial District — has become the default address for multinational RHQs. The district hosts 140-plus commercial tenants, including 75-plus multinational headquarters, with 580,000 square metres of office space leased and approximately 20,000 professionals working within its campus daily.
The office market’s tightness is simultaneously evidence of the mandate’s success and a constraint on its expansion. Companies that want to comply cannot find space. The rent increases add to the cost of compliance — a cost that is ultimately passed through to the government in the form of higher service fees and to the companies in the form of reduced margins on Saudi operations.
The Talent Paradox
Saudi Arabia achieved a record-low unemployment rate of 2.8 per cent in the first quarter of 2025 — a headline figure that suggests a labour market at full capacity. Beneath the headline, 46 per cent of HR professionals report that finding qualified talent has become harder, and 64.29 per cent of private-sector organisations cite a lack of skilled applicants as their greatest recruitment challenge.
The paradox is structural. The mandate brought companies to Riyadh. It did not bring the talent those companies need to operate. A 20 per cent shortfall exists between technology job vacancies and qualified local talent. AI engineers, cloud architects, and data analysts are in critically short supply. Korn Ferry projects a skilled worker shortage of 663,000 by 2030, representing $206.77 billion in unrealised revenue.
Saudisation requirements compound the challenge. The 2026 labour law mandates a 25 per cent Saudisation rate even for RHQs — one Saudi national for every three expatriates. Law firms must achieve 70 per cent Saudi lawyers. Accounting firms require 40 per cent Saudi nationals, rising to 70 per cent by 2030. The requirements are designed to ensure that the mandate produces Saudi jobs, not just expatriate relocations. They also constrain companies whose Saudi workforce pipeline is insufficient to meet the quotas.
The salary premium that lured foreign talent to Riyadh is collapsing. In the mandate’s early phase, project managers earning $60,000 in the UAE received $100,000 offers in Saudi Arabia — premiums of 40 per cent or more, sometimes doubling existing salaries. Those premiums are ending. Saudi project awards nearly halved in the first nine months of 2025, reducing the demand for foreign talent and the premiums required to attract it. The fiscal tightening that suspended The Line and the Mukaab has also tightened the labour market for the consultants, engineers, and managers the mandate was supposed to attract.
The Housing Crisis
The influx of expatriate professionals created a housing crisis severe enough to require emergency intervention. Rents in Riyadh compounds rose more than 30 per cent since 2022. Expatriates increasingly moved outside gated compounds — historically the default housing for foreign professionals in Saudi Arabia — because compound rents had become unaffordable.
On 25 September 2025, Crown Prince Mohammed bin Salman ordered a five-year rent freeze in Riyadh — an extraordinary intervention that signalled the severity of the problem. From December 2025, landlords must provide tenants 365 days’ notice before lease expiry. The freeze addresses the symptom — rapidly rising rents — without addressing the cause: a mandate that brought thousands of professional households to a city whose housing stock was not built for them.
The housing intervention is the most visible example of the mandate’s secondary effects. The government created demand (through the headquarters mandate) without proportionally creating supply (through housing construction). The supply gap produced price inflation. The price inflation produced a political problem. The political problem produced a royal decree. The decree produced a price freeze. The price freeze will, in time, produce reduced housing investment (because landlords cannot capture returns) — which will produce reduced supply — which will produce the next shortage. The cycle is the consequence of using coercion to create demand in markets that require investment to create supply.
The Dual-Hub Reality
The evidence suggests that the Riyadh mandate has not replaced Dubai as the Gulf’s business capital. It has created a dual-hub model in which both cities serve distinct functions.
Dubai retains its advantages: 40-plus free zones, common-law courts in the DIFC and ADGM, a 9 per cent corporate tax rate, faster company formation, and a mature expatriate ecosystem with established international schools, healthcare, and social infrastructure. Saudi Arabia offers the larger domestic market (36 million people versus the UAE’s 10 million), massive government spending, and a 30-year zero per cent corporate tax rate for RHQ holders (versus the standard 20 per cent Saudi corporate tax).
The competitive dynamic is not zero-sum. Companies need both markets. The mandate ensured they must have a physical presence in Saudi Arabia. It did not ensure they must choose Saudi Arabia over the UAE. The result is the Visa model: dual presence, split regions, compliance in both jurisdictions. The companies that were supposed to “move” to Riyadh have, in many cases, “expanded” to Riyadh — adding a presence without subtracting from Dubai.
Riyadh’s cost advantages are real but narrowing. Restaurant prices are approximately 38 per cent lower than Dubai. Transport costs are lower (petrol at 2.23 riyals per litre versus 2.74 dirhams in Dubai). The Riyadh Metro, operational since January 2025, provides infrastructure that Dubai has had for 15 years. The entertainment transformation — cinemas, concerts, restaurants — has made Riyadh more liveable than it was in 2021, when the mandate was announced. But 57 per cent of employees in Saudi Arabia report experiencing burnout, and the social life is described by expatriates as “quieter, slower, and often lonelier than people expect.” The 0 per cent income tax is a powerful incentive. Whether it compensates for a lifestyle that many expatriates find restrictive is a question each household answers differently.
The Quality Question
The mandate’s ultimate test is not whether companies came to Riyadh. They did — 700 licences confirm it. The test is whether the companies that came are doing real work in Riyadh or performing compliance theatre.
The evidence is mixed. KAFD’s 20,000 daily professionals represent genuine economic activity. The 75-plus multinational headquarters making decisions, signing contracts, and managing Saudi operations from Riyadh represent genuine institutional weight. The consulting firms — McKinsey, BCG, Bain, Deloitte, PwC — have all established substantial Riyadh presences because their Saudi revenue demands it.
But the gap between 700 licences and 350 operational headquarters, the region-splitting workaround, the enforcement exemptions, and the shell office regulations all point to a programme that has moved faster on paper than in practice. The mandate forced compliance. Compliance is not the same as commitment. A company that opens a Riyadh office because it must is not the same as a company that opens a Riyadh office because it should. The mandate cannot manufacture the second without first demonstrating that Riyadh offers more than a contractual obligation — that it offers talent, infrastructure, quality of life, and a business environment that makes the headquarters worth having even without the threat of procurement exclusion.
The mandate has produced headquarters. Whether it has produced a headquarters economy — an ecosystem in which companies locate decision-making in Riyadh because the city’s advantages justify the cost — will be determined by what happens when the enforcement softens further, when the exemptions expand, and when companies discover whether the Riyadh they moved to is worth staying in.
Seven hundred licences. Three hundred and fifty operations. A 50 per cent conversion rate. A rent freeze ordered by the Crown Prince. A talent crisis at record-low unemployment. And a dual-hub model that gives Saudi Arabia what it demanded — a headquarters — while giving Dubai what it already had: the business.
This analysis draws on Ministry of Investment RHQ licence data; Semafor reporting on loopholes, Visa’s regional split, and Wall Street bank compliance strategies; AGBI reporting on anti-shell-office rules; Middle East Briefing and Arab News on the 25% procurement exemption; JLL’s KSA Office Market Dynamics Q2 2025; Arab News and Arabian Business on Riyadh rent increases and office supply; KAFD tenancy and operational data; Jobskey Search, Qureos, and Arab News on Saudi talent market conditions; Korn Ferry skilled worker shortage projections; Economy Middle East and Al Arabiya reporting on the Crown Prince’s rent freeze; the US State Department 2025 Investment Climate Statement; Gallup Saudi Arabia workplace data; and comparative analysis from The Middle East Insider and Compare the City. Vision2030.AI is editorially independent and is not affiliated with the Ministry of Investment, KAFD, PIF, or any official Vision 2030 entity.