Saudi Snapshot
Saudi Arabia’s Industrial Sector:
Unveiling remarkable growth under Vision 2030
Table of Contents
1. MARKET OVERVIEW
1.1 Driving economic transformation: exploring Saudi Arabia’s industrial real estate prospects
1.2 Pandemic-driven transformation: accelerating growth in Saudi Arabia’s industrial sector
1.3 NIDLP: powering progress and building for the future
2. WINDS OF CHANGE: INDUSTRIAL REAL ESTATE TRENDS AND OPPORTUNITIES
2.1 E-commerce surge fuels demand for state-of-the-art warehousing facilities
2.2 Strengthening supply chain: Saudi Arabia’s path to becoming a global logistics hub
2.3 Untapped potential: seizing the growth opportunities in Saudi Arabia’s self-storage market
3. TAPPING INTO OPPORTUNITY: CURRENT STATE OF WAREHOUSE SUPPLY
3.1 Expanding horizons: High-tech warehouses in demand
3.2 Leading the Charge with renewable energy
3.3 Versatility: The key to unlocking the future
4. NAVIGATING THE LANDSCAPE: OVERCOMING CHALLENGES IN SAUDI ARABIA’S
INDUSTRIAL REAL ESTATE SECTOR
4.1 Enhancing Supply Chain Efficiency: Embracing Decentralization for KSA’s Geographical
Challenges
4.2 Bridging the Workforce Gap: Meeting the Demands of Saudi Arabia’s Growing Warehousing
Sector
5. CLOSING PERSPECTIVES: KSA AT THE THRESHOLD OF A TRANSFORMATIVE SHIFT
1. Market Overview
1.1 Driving Economic Transformation:
Exploring Saudi Arabia’s Industrial Real
Estate Prospects
Saudi Arabia’s industrial real estate sector has
been experiencing remarkable performance,
showcasing the tangible impact of the
transformative Vision 2030. In Saudi Arabia’s
bid to diversify its economy away from
hydrocarbons, the government’s efforts are
increasingly focused on the manufacturing
sector, recognising its growing significance in the
country’s overall economic landscape.
More recently, Saudi Arabia has posted a 4.8%
expansion of the non-oil sector, driven primarily
by private sector investments and consumption.
The total volume of investments in the industrial
sector has reached $380 trillion while new
investments crossed $2 billion in Q1 of 2023
alone, creating 28,000 new jobs in its wake.
Playing a pivotal role in this growth is MODON,
the Saudi Authority for Industrial Cities
and Technology Zones, which has actively
contributed to the development of 36 industrial
cities spanning over 200 million square meters
of developed land. As part of its efforts, MODON
now offers a diverse range of products and
services, including readily available warehouses,
self-storage units, turnkey factories, and
financing solutions tailored for SMEs.
reports track the delivery of strategic goals,
initiatives, and key performance indicators (KPIs).
1. Market Overview
1.2 Pandemic-Driven Transformation: 1.3 NIDLP: Powering Progress and Building
Accelerating Growth in Saudi Arabia’s for the Future
Industrial Sector Moreover, Saudi Arabia’s National Industrial
While the government’s initiatives have Development and Logistics Program (NIDLP)
been instrumental in revitalising the is playing a crucial role in positioning the
industrial sector, the pandemic and the kingdom as a prominent industrial powerhouse
subsequent changes it brought have also and logistics hub. Launched in 2019 with a
acted as catalysts for its growth. The surge budget of USD 347 billion, the programme is
in e-commerce, in particular, has fueled the actively involved in developing key logistical
demand for state-of-the-art distribution infrastructure, nurturing human capital, and
centres, logistics facilities, and high-quality promoting research and innovation to support
warehouses. the creation of high-value-added industries.
Having achieved significant milestones, such as
the inauguration of SPARK (King Salman Energy
Park), an expansive industrial complex housing
energy-related industries, the programme has
successfully established landmark international
partnerships, including one with South Korea, to
develop KSA’s hydrogen fuel cell industry. With
its substantial contributions of 1.3 million jobs
and a 16% increase in the Kingdom’s non-oil
GDP, NIDLP is poised to play a crucial role in
Saudi Arabia’s pursuit of sustainability goals.
2. Winds Of Change: Industrial Real Estate
Trends And Opportunities
2.1 E-commerce Surge Fuels Demand 2.2 Strengthening Supply Chain: Saudi
for State-of-the-Art Warehousing Arabia’s Path to Becoming a Global Logistics
Facilities Hub
Consumer shopping habits across the Saudi Arabia is striving to become a global
world have gone through a permanent logistics hub and strengthening its supply
shift to e-commerce. Globally, chain is critical for achieving its economic
e-commerce sales are expected to grow diversification plans. The National Industrial
by 10.4% in 2023 while 20.8% of all retail Development and Logistics Program (NIDLP)
purchases will take place online. Like has already added five new shipping services
elsewhere in the world, e-commerce has to Saudi Arabia’s ports, linking the GCC
grown at an unprecedented pace in KSA, country to 43 international ports. The National
especially after the pandemic. Transportation and Logistics Strategy back this
initiative, focusing on enhancing maritime cargo
In Q1 of 2023, KSA’s e-commerce capacity and establishing railway networks to
industry has expanded by a whopping ensure seamless multimodal connectivity. More
32% with revenues expected to touch specifically, re-export activities are on an upward
$11.98 billion by the end of the year. The trajectory, with the market size for the sector
market has more potential for growth, having grown to SAR 43.5 billion. This is driving
as e-commerce penetration currently the demand for warehousing and logistics
stands at around 6% compared to the facilities further.
global average of 18%.
Saudi Arabia’s recently launched next-
The growth of the e-commerce sector generation special economic zones, developed
is driving the demand for modern as the launchpad for growth into new targeted
and technologically sophisticated markets, requires the addition of relevant
warehousing facilities in the country. High industrial-grade infrastructure and development
warehousing demand from e-commerce including warehouses, manufacturing facilities,
players has pushed investments in the R&D centres and more.
sector by 281 per cent, according to
Knight Frank. Within just one month of their launch, the
Efficient warehousing and logistics special economic zones of the King Abdullah
infrastructure are critical to further Economic City, Jazan, Ras Al Khair and Cloud
expansion, together with several other
key enablers including fulfilment centres.
With the growth of the e-commerce
sector significantly outpacing that of
traditional retail in KSA, demand for
warehousing facilities is only going to
increase further.
2. Winds Of Change: Industrial Real Estate
Trends And Opportunities
Computing, in the King Abdulaziz City financing solutions, is fueling the demand for
for Science and Technology, successfully self-storage facilities. These businesses often
attracted $12.6 billion from investors require secure and flexible storage spaces to
across key segments of maritime, mining, store inventory, equipment, and documents, and
manufacturing, logistics, and tech. self-storage facilities provide a cost-effective
and convenient solution. As a result, the self-
These facilities will support the increased storage market in Saudi Arabia is well poised for
flow of goods, enabling Saudi Arabia to growth to meet the evolving storage needs of
reach its goal of becoming a top global both urban residents and [Link] majority
logistical hub, utilising its strategic of self-storage units, such as Makhzany and
location that offers access to 70% of the Self Storage Co., are currently concentrated in
world’s population within 8 hours of flight the Eastern Province. However, their success
time. and the high demand they have experienced
have spurred developers in other regions of the
2.3 Untapped Potential: Seizing Kingdom to launch similar projects, expanding
Growth Opportunities in Saudi Arabia’s the accessibility of self-storage options across
Self-Storage Market the country.
Self-storage units provide individuals with
a flexible solution for storing personal Considering that self-storage is still a relatively
belongings on a short-term or long-term new concept in Saudi Arabia, there is substantial
basis. Despite limited availability, various untapped potential in this underserved
factors are contributing to the increasing market segment. As awareness grows and
demand for such facilities in Saudi Arabia, more individuals and businesses recognise its
driving the growth of this industrial benefits, the demand is expected to continue
subsector. to rise. This presents an enticing opportunity
for developers and investors to capitalise on
Rapid urbaniation is a primary contributor, the expanding market and cater to the rising
as the country’s urban centres are demand for self-storage services.
witnessing a surge in population and
residential development. With smaller With its potential for growth and unmet demand,
living spaces and the need for additional the future of the self-storage industry in Saudi
storage, individuals and families are Arabia appears promising. As the market evolves
turning to self-storage solutions to meet and more players enter the scene, it is expected
their expanding storage requirements. to provide individuals and businesses with even
more options and solutions for their storage
Furthermore, the growth of small and needs.
medium-sized enterprises (SMEs) in
the Kingdom, supported by improved
3. Tapping Into Opportunity:
Current State Of Warehouse Supply
The overall market warehouse supply in Riyadh, city is slated to have a massive fully-automated
Jeddah, and Dammam Metropolitan Area logistics hub running entirely on renewable
(DMA) consists of low-to-mid quality dry and energy. Under KSA’s Digital Transformation
cold storage along with open yards. Currently, Policy around 4,000 existing factories are being
there is a dearth of modern, high-quality upgraded and all upcoming factories will be built
warehousing facilities and the majority of to the highest international standards.
available stock is owner-occupied. Despite the
growing demand for high-quality warehouses, 3.2 Leading the Charge with renewable
developers are slow to develop new properties energy
and doing so only when demand is confirmed. As clean energy takes centre stage in Saudi
Arabia’s Vision 2030, businesses are increasingly
By 2025, only a 5% increase in supply is recognising the importance of aligning their
expected in Riyadh. In Jeddah, the stock is processes with this vision. A growing number
expected to increase by 8% while any new of individual players in KSA are adopting green
supply in the city, which is strategically located energy sources to lower their carbon footprint.
on the country’s Red Sea, is expected to be
absorbed by the market quickly. In DMA, the Agility’s Logistics Park complex in Riyadh
warehousing market is smaller and is expected recently became the first building in KSA and
to grow by around 4-5% by 2025. the first warehouse in the GCC region to receive
This shortage, which is expected to get EDGE Advanced certification as green buildings.
more pronounced considering the major Lulu’s Riyadh-based warehouses are shifting
investments in manufacturing and logistics to solar panels as part of the brand’s ESG
sectors, could give way to the development of commitments. SADAFCO is following suit in a
a vibrant institutional investment market within bid to lower its carbon footprint and so are many
the sector. others.
3.1 Expanding horizons: High-tech Switching to alternative and clean energy
warehouses in demand sources entirely or to supplement existing
Sudair, an industrial city close to Riyadh, saw the sources is enabling businesses to reduce costs
inauguration of KSA’s very first fully automated of business while enabling KSA to meet its
warehouse in 2019. Landmark Arabia-owned net-zero targets for 2060. Industrial occupiers
45,000 sqm facility inspired others to follow believe they could save up to 50% in energy
suit. Following this, the National Unified costs by transitioning to renewable energy
Procurement Company (NUPCO) launched the sources. With KSA’s eye on restructuring its
Kingdom’s largest, fully automated 300,000 entire energy sector, environment-friendly
sqm warehouse in Riyadh the following year. facilities, including warehouses, will be in higher
There is a growing trend towards fully or demand.
partially automated facilities that improve
efficiency and reduce costs. The Oxagon,
within NEOM, is a great example of this as the
3. Tapping Into Opportunity:
Current State Of Warehouse Supply
3.3 Versatility: The key to unlocking the future
Prospective occupants are increasingly in search of
versatile floor plans that can accommodate various
warehousing functions, including the separation of
spaces for ambient storage and cold storage. The
availability of open yards is essential to cater to the
expansion requirements dictated by the specific
market demands of their products. The ability to
adapt and scale operations based on market needs
is a crucial factor for tenants.
Moreover, industrial zones that offer value-added
services have the potential to generate substantial
additional income for large-scale projects. These
services can range from visa processing and data
management to other customised solutions tailored
to meet the specific needs of industrial tenants.
By understanding the need for flexible layouts,
industrial real estate developers can create a
competitive edge in the market. Flexibility in layout
design and the provision of value-added services
can attract a diverse range of tenants, increase
occupancy rates, and ultimately drive additional
revenue streams.
4. Navigating The Landscape: Overcoming
Challenges In Saudi Arabia’s Industrial Real
Estate Sector
4.1 Enhancing Supply Chain Efficiency: Embracing Decentralization for KSA’s Geographical
Challenges
Saudi Arabia’s industrial real estate sector faces challenges related to the geographical distribution
of its warehousing facilities. Currently, a majority of the nation’s logistics centres are concentrated in
major cities such as Riyadh, Jeddah, and Dammam. However, the vast size of the country, coupled
with the diverse and rugged topography, poses logistical difficulties for the movement of goods
along the supply chain. Moreover, extreme temperatures present additional challenges, particularly
for temperature-sensitive products.
To overcome these obstacles, warehousing facilities need to be strategically located across the
country. This decentralised approach will bring storage and distribution centres closer to key
demand areas, reduce transportation distances and optimise supply chain efficiency.
4.2 Bridging the Workforce Gap: Meeting the Demands of Saudi Arabia’s Growing
Warehousing Sector
An ongoing challenge in warehouse management is the availability of a sufficient workforce to meet
the demands of the growing warehousing sector in Saudi Arabia. To address this challenge, it is
crucial to develop initiatives that focus on attracting and training skilled workers for the warehousing
sector. Collaborations between the government, industry stakeholders, and educational institutions
can play a vital role in creating training programmes to equip individuals with the necessary skills
for warehouse operations. Saudi Arabia’s progressive policies, such as the Human Resource
Development Fund (HRDF), encourage vocational training for Saudis and provide reimbursement
to employers for up to 50 per cent of training costs. Additionally, investing in automation and
advanced technologies can help optimise warehouse processes and reduce the dependency on
a large workforce. By implementing effective workforce management strategies and embracing
technological advancements, companies can overcome the labour shortage challenge and ensure
efficient operations.
5. Closing Perspectives: KSA At The Threshold
Of A Transformative Shift
The industrial real estate market in Saudi Arabia is undergoing a transformative
phase, driven by government initiatives and changing market dynamics. The
increasing demand for modern warehousing facilities and the focus on logistics
infrastructure are shaping the future of the market.
The growth of e-commerce and the rise of self-storage present lucrative
opportunities while challenges related to geographical distribution and labour
shortage need to be strategically addressed.
Looking ahead, the market is expected to remain favourable for landlords in the
short to medium term, with rental rates on the rise due to the limited availability
of high-quality, well-maintained stock. This trend underscores the need for
well-managed and efficiently designed industrial properties to meet the growing
demand and capitalise on the market’s potential.
Immerse yourself in the dynamic atmosphere of professionals, visionaries, and key influencers at
the Industrial track of the Property Portfolio Forum at this year’s Cityscape Global.
Explore the latest investment prospects in Saudi Arabia’s industrial landscape, discover innovative
methods to leverage technology for enhanced operational efficiency, and delve into sustainable
practices and green initiatives within the realm of industrial real estate.
Seize this invaluable opportunity to network with industry peers, stay abreast of market
developments, and acquire invaluable knowledge in the field.
Industrial Track - Property Portfolio Forum
Conference Topics
1 A review of the top trends the industry is moving towards and how organisations can adapt to
the next wave of transformation.
2 Strategies to make our people, processes, technology, and finances more resilient in our post-
COVID world.
3 The current risks that exist in the market indicating a slower, future growth trajectory, and what
investors and occupiers need to look out for.
4 A look at decarbonisation and how the real estate industrial sector can collaborate to realise
their sustainability goals.
5 Ways the industry can leverage digital technologies, meet stakeholders’ needs and maximise
shareholder value.
6 Why a circular economy is a viable opportunity for industrial stakeholders.
7 How KSA can achieve its goals of being an industrial hub in the MENA region, and attract
occupiers.
Register Now
10 - 13
SEPTEMBER 2023
Riyadh Exhibition & Convention Center
Malham Kingdom of Saudi Arabia
