Warehouse occupancy in Saudi Arabia nearing saturation: Knight Frank
RIYADH: Saudi Arabia's industrial and logistics market is experiencing growth, with warehouse occupancy rates nearing saturation and rental prices in Riyadh increasing by 16 percent year-on-year, according to Knight Frank.
The firm's latest 'Saudi Arabia Industrial and Logistics Market Review' highlighted a booming sector driven by e-commerce expansion, strategic government initiatives, and surging foreign investment.
The Kingdom's logistics hubs — Riyadh, Jeddah, and the Dammam Metropolitan Area— are operating at near-full capacity.
Riyadh leads with a 98 percent occupancy rate, while Jeddah and Dammam follow closely at 97 percent each.
This momentum was also reflected in occupancy rates, with Abu Dhabi's industrial and logistics market maintaining near-full capacity, mirroring Dubai's tight supply.
Key hubs like Khalifa Economic Zones Abu Dhabi and Abu Dhabi Airports Free Zone saw sustained demand, driven by strategic infrastructure projects and growing manufacturing activity, according to a separate report by Knight Frank.
Riyadh's prime warehouse spaces now command rents exceeding SR250 ($66.6) per sq. meter, while city-wide averages hit SR208.
'Despite a slowdown in demand during the second half of the year, city-wide rental rates increased by 16 percent year-on-year,' the report said.
Jeddah's lease rates for Grade B facilities rose to SR238 per sq. meter, with the high-end Asfan district maintaining 100 percent occupancy at SR387 per sq. meter. Dammam Metropolitan Area saw rents jump 14.8 percent to SR202 per sq. meter, fueled by a chronic shortage of quality logistics space.
E-commerce and mega-projects fuel growth
Rapid urbanization, a tech-savvy consumer base, and giga-projects like the Special Integrated Logistics Zone and Sino-Saudi Logistics Zone are reshaping demand.
'Demographic shifts including rapid urbanization, increased female workforce participation, and a tech-savvy Gen Z and millennial consumer base are accelerating the growth of the e-commerce sector,' the report stated.
The 3-million-sq. meter Special Integrated Logistics Zone has attracted global players like SHEIN and Apple, while the 4-million-sq. meter Sino-Saudi zone aims to strengthen trade ties with China.
Government initiatives and private investment
The National Industrial Development and Logistics Program is a cornerstone of the Kingdom's industrial strategy, aiming to increase the transport and logistics sector's contribution to the gross domestic product to 10 percent by 2030, from 6 percent in 2021.
Public-private partnerships are flourishing, with projects like the Tamer Logistics Park and Agility Logistics Park set to expand supply in key regions.
'Substantial investments to improve and expand connectivity and trade infrastructure, along with regulatory reforms are helping transform Saudi Arabia into a logistics powerhouse,' the report emphasized.
Sustainability and digital transformation
The sector is also pivoting toward sustainability and automation. Companies like Maersk and Agility are adopting solar-powered warehouses, while digital tools streamline operations.
'Sustainability has become a major market driver, with companies integrating renewable energy fields and LEED-certified buildings,' said Adam Wynne, partner at Knight Frank.
With 36,000 factories projected by 2035 and FDI reforms attracting multinationals, Knight Frank predicts sustained growth.
'Saudi Arabia is on track to become a regional logistics powerhouse,' Wynne said, citing the Kingdom's integration of 'global expertise, modern infrastructure, and green initiatives.'
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