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Riyadh struggles with severe warehouse space crunch despite new supply
Saudi Arabia is facing a shortage of warehousing space due to surging demand, driven by the ongoing giga-projects and conservative investment approach of landowners, global real estate consultancy Knight Frank said in a new report.
“Riyadh’s giga-projects are driving up warehousing demand levels not only for the storage of construction and building materials, but they are catalysing the emergence of new and dedicated industrial and logistics hubs, said Faisal Durrani, Partner – Head of Research, MENA, Knight Frank,” said.
The new supercities in Riyadh include the development of extensive transportation networks and commercial complexes, driving substantial demand for storage and distribution facilities across the city.
Despite 820,000 square metres (sqm) of industrial and logistics space currently under construction in Riyadh, the city faces a severe shortage of warehouse space amid rapid economic growth and growing demand for modern logistics solutions.
Most of the under-construction supply is located in the Industrial Gate District (456,000 sqm), followed by the Jabal Ali district (130,000 sqm).
Average lease rates for light industrial units and Grade B warehouse space are up 10.4 percent year-on-year at SAR 210 per sqm in Riyadh. The 100 percent occupied Logistic Park Riyadh commands the highest rates at SAR 290 per sqm.
Jeddah’s warehouse and logistics sector has seen an increase in supply over the past 12 months, bringing the total stock to 19.6 million sqm. By the end of first half of 2024, the market-wide average lease rates for light industrial units and Grade B facilities stood at SAR 208 per sqm, with an average occupancy rate of 97 percent.
Developing high-quality warehousing facilities is crucial for supporting Saudi Arabia’s role as a logistics hub in the Middle East, Mikhail Vereshchagin, Associate Partner - Industrial & Logistics, Knight Frank, said.
Overcoming the current shortage of warehousing spaces will require not only investment but a greater emphasis on collaboration between local and international players, he stated. |
