Investments in Saudi Arabia’s industrial real estate sector have jumped by 281 percent on the back of high warehousing demand from e-commerce players, according to Knight Frank.
During the first half of 2021, the sector saw the value of investments hit 20.5 billion riyals ($5.467 billion), while the number of jobs created reached 30,000, the real estate company said.
The online shopping boom during the pandemic has helped drive the occupancy levels and prices in the market, said Faisal Durrani, partner - head of Middle East research.
In Riyadh, rent prices were up seven percent in the first half compared to the same period last year, while Jeddah saw a 4.5 percent year-on-year growth.
“While the government’s economic initiatives have been a catalyst for the growth in the industrial sector, the pandemic has played an equally significant role,” said Durrani.
With the shift to online shopping, he said the demand for modern distribution facilities has also gone up.
“We do not expect a let-up in online shopping and indeed the government forecasts revenues for the sector to close in on 30 billion riyals this year, up from 24.7 billion riyals in 2020.”
Durrani said occupancy levels were 92 percent in Riyadh and 87 percent in Jeddah, both up two percent on the previous year. Prime rents have increased by nearly eight percent while grade B rents have reduced by 3.5 percent, he added.
Knight Frank said developers are now increasingly building stock only when demand is confirmed, limiting new supply, whereas previously, warehousing and logistics facilities were built on a speculative basis.
“The shortage of prime supply, combining with the shift in developer attitudes towards speculative development means we may be on the cusp of creating a vibrant institutional investment market, provided adequate international regulations are also developed,” Durrani said.
(Writing by Imogen Lillywhite; editing by Cleofe Maceda)
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