Saudi industrial strategy to drive real estate demand: report

The SAR 100-billion investment planned under Saudi Arabia’s industrial strategy sector will boost demand for industrial real estate, consultancy firm CBRE said in a recent report.

The industrial strategy for aims to create 1.6 million jobs and attract SAR 1.6 trillion in investments by 2030, as the nation looks to continue its transformation into a world-class logistics hub, it noted.

The continued rise of e-commerce will fuel the need for alternative industrial products while technologies, such as self-driving vehicles, robotics, automation and artificial intelligence will further shape space requirements, CBRE said.

Another key trend identified includes de-globalization of supply chains, which will bring production and inventory closer to end consumers and the upward drive of rental prices due to demand continuing to outpace supply.

Riyadh currently has close to 70 million square meters (sqm) of gross floor area (GFA) in important industrial areas such as Riyadh Industrial City 2 (MODON), Sulay Industrial Area and Al Mishal Industrial Area.  

Meanwhile, Jeddah has 65 million sqm of GFA available in areas including Jeddah Industrial City 1, Al Khumra Industrial Area and King Abdullah Economic City. As of 2018, Dammam has a supply of 28 million sqm GFA in areas including Dammam Industrial Cities 2 and 3 and Khalidiya Industrial Area, amongst others.

“Saudi Arabia has a number of key natural attributes that will enable the country to emerge as a logistics hub of global significance.  The Kingdom benefits from a central location that allows for optimal distribution to the GCC, wider Middle East region and North and East Africa – as well as residing on the Asia-to-Europe trade route,” said Simon Townsend, general manager (KSA) and head of strategic advisory, CBRE MENAT.

“The logistics industry will prove vital in enabling the nation to achieve its long-term diversification objective. Additionally, the sector provides various opportunities for foreign investors who are eager to enter the Saudi market,” he stated.

According to CBRE, the continued growth of non-oil sectors is expected to generate increased demand for industrial and logistics space in the Kingdom.

Additionally, government initiatives that facilitate imports and exports by bolstering infrastructure across Saudi Arabia will enhance the competitiveness of the country’s logistics sector, as will regulatory reforms that promote public-private sector partnerships and facilitate direct foreign investment, it added.

Several major upcoming projects will also increase the number of high-quality stock for investors and end-users alike which include Tharwat Logistics City, Riyadh; Asfan Smart Industrial City 2, Jeddah, and Riyadh Integrated Logistics Bonded Zone, near the King Khalid International Airport.

“The logistics sector is growing rapidly, and we expect it to be a real game-changer in terms of strengthening Saudi Arabia’s value proposition as a key strategic hub and regional leader in the industrial sector,” said Nicholas Maclean, Managing Director, CBRE MENAT​.