Saudi Arabia Faces Warehousing Shortage Due to Giga-Project Boom: Knight Frank

Saudi Arabia is experiencing a significant shortage of warehousing space, primarily driven by the surge in demand linked to ongoing giga-projects and the cautious investment strategies of landowners, according to a new report by global real estate consultancy Knight Frank.

Faisal Durrani, Partner – Head of Research, MENA at Knight Frank, noted, “Riyadh’s giga-projects are not only increasing demand for the storage of construction materials but are also fostering the growth of new industrial and logistics hubs.”

The expansion of transportation networks and commercial complexes in Riyadh’s new supercities has led to a substantial need for modern storage and distribution facilities. Despite 820,000 square metres (sqm) of industrial and logistics space currently under construction, Riyadh still faces a severe shortage amid its rapid economic growth.

Read More: Riyadh Warehouse Rents Rise 20% During H1 2023

Most of this space is being developed in the Industrial Gate District (456,000 sqm) and the Jabal Ali district (130,000 sqm). Lease rates for light industrial units and Grade B warehouses have increased by 10.4 percent year-on-year to SAR 210 per sqm in Riyadh, with Logistic Park Riyadh, which is fully occupied, commanding the highest rates at SAR 290 per sqm.

In Jeddah, the warehouse and logistics sector has expanded, with total stock reaching 19.6 million sqm and lease rates at SAR 208 per sqm, with 97 percent occupancy.

Mikhail Vereshchagin, Associate Partner - Industrial & Logistics at Knight Frank, emphasized that developing high-quality warehousing is vital for Saudi Arabia’s logistics hub ambitions. Addressing the current shortage requires investment and collaboration between local and international stakeholders.

Read More: DB Schenker Partners with Kaden to Expand Presence in Saudi Arabia