Saudi industrial, logistics sectors to provide new opportunities for occupiers, investors: Knight Frank

Development in regulations and soft and hard infrastructure are set to provide sizeable opportunities for occupiers and investors alike in Saudi Arabia’s industrial, warehousing and logistics sectors despite challenges in the short to medium term, Knight Frank said in a report titled “The Saudi Arabia Industrial Market Review H1 2020”.

“The outlook for Saudi Arabia’s industrial, warehousing and logistics sector is likely to be challenging in the short to medium term,” Taimur Khan, Associate Partner at Knight Frank Middle East, said.

Saudi Arabian industrial and logistics market is divided into two types of industrial developments, first those provided by the Saudi Authority for Industrial Cities and Technology Zones (MODON) and secondly private industrial cities.

Riyadh industrial manufacturing supply

Areas developed by MODON account for the majority (73%) of the developed area. The remaining 27% of developed land has been developed by the private sector.

Riyadh warehouse and logistics supply

Riyadh’s vast majority of warehouse and logistics supply comprises developments featuring conventional warehouses such as dry-storage, cold-storage, and open yards.

Jeddah industrial manufacturing supply

Jeddah’s four industrial cities have a total of approximately 105 million square meters of land allocated for industrial development, of which approximately 29 million square meters have been developed to date.

Jeddah warehouse and logistics supply

Over the last five years, Jeddah’s warehousing and logistics landscape has seen a marked change. One of the most notable changes has been the relocation of industrial activities from the districts of An Nuzha and Al Jamiah as part of Jeddah Municipality’s regeneration plans for these areas.

The report further stated that in the short-term, Saudi Arabia’s industrial and logistics sectors face some considerable headwinds, namely as a result of COVID-19 and on the back of multiple reforms enacted by the government.

Given these challenging macroeconomic conditions, Knight Frank expects rental rates and occupancy levels to soften over the course of 2020.

“However, given the nascent nature of the sector in Saudi Arabia, its strategic location and sizeable domestic economy alongside its flexible regulations, the fundamentals underpinning a growing industrial and logistics sector remain strong, despite some short-run challenges,” Khan noted.