Saudi Arabia’s logistics and warehousing sector is rapidly expanding, fuelled by the National Industrial Development and Logistics Program (NIDLP) under Vision 2030, a booming e-commerce market and increasing demand for Grade A warehousing.
A new report by JLL highlights the key factors driving this growth, along with the challenges and opportunities in powering the Kingdom’s ambition to become a global logistics hub. The whitepaper also highlights significant interest and investment from both domestic and international institutional players, recognizing the industrial and logistics sectors as key pillars of Saudi Arabia’s economic diversification strategy.
Vision 2030 spurs logistics growth
The ambitious growth is catalysed by Saudi Arabia’s Vision 2030, which aims to position the Kingdom among the top 10 countries in the Logistics Performance Index, and the NDLP agenda, which aims to boost the sector’s GDP contribution and localize 70 percent of the supply chain. Saudi Arabia is laying the foundation for a robust and efficient logistics ecosystem through substantial investments in transportation infrastructure, streamlined processes and regulatory frameworks, says the whitepaper.
“Saudi Arabia’s position as a global logistics hub offers unparalleled access to a growing consumer market spanning three continents, making logistics and warehousing vital for high-growth sectors. Guided by Vision 2030, the Kingdom is strengthening its logistics infrastructure and transportation network, prioritizing sustainability, and building strong local partnerships for seamless global commerce,” said Abhishek Mittal, head of industrial advisory, MENA at JLL.
Mittal adds that this agile and resilient network facilitates efficient movement of resources, offering investors significant opportunities to capitalize on reduced costs, efficient supply chains and increased access to a vibrant and growing market.
Global institutional investors create shift towards Grade A facilities
Among the key drivers fuelling demand for Industrial and Logistics in Saudi Arabia are the establishment of strategically located Special Economic Zones (SEZs) and industrial cities. While 36 industrial cities offer ready-built factories, warehouses and logistics facilities, attractive incentives and tax breaks at King Abdullah Economic City (KAEC), King Salman Energy Park (SPARK), and Jazan Economic City (JEC), are creating clusters of economic activity and driving investment and innovation.
This dynamic environment attracts significant capital from global institutional investors, who are moving away from traditional Grade B/C warehouses, which currently comprise about 90 percent of the market.
JLL’s whitepaper also reveals a noticeable shift towards sophisticated Grade A facilities as global institutional investors across industries, including DP World, Gulf Islamic Investments, Arcapita Capital Company and AP. Moller–Maersk demands built-to-suit warehouses, cold storage facilities and last-mile delivery hubs, demonstrating confidence in the Saudi market.
E-commerce surge drives growth in industrial real estate market
The logistics and industrial real estate market is benefiting from Saudi Arabia’s position as the largest e-commerce market in the GCC, supported by high internet penetration (97 percent), a young and tech-savvy population and a growing consumer preference for online shopping. Modern commerce and e-commerce are expected to contribute around 80 percent to the retail sector by 2030, stimulating significant demand for modern warehouses, strategically located fulfilment centers and last-mile delivery hubs.
Meanwhile, investment trends in e-commerce warehousing are also shifting with institutional investors and real estate developers focusing on built-to-suit logistics parks catering to e-commerce and retail tenants, and real estate investment trusts (REITs) allocating more capital toward logistics assets.
Food, pharmaceutical sectors leading demand for specialized logistics solutions
The whitepaper also identifies the key industries of food and pharmaceuticals as leading the demand for specialised logistics solutions, including cold chain storage and temperature-controlled warehousing. Saudi Arabia has one of the largest pharma markets in the Middle East, and its healthcare infrastructure is expanding.
The Kingdom also imports 80 percent of food, and consumers are increasingly shifting online for grocery and food delivery. These industries require highly regulated and technologically advanced supply chain solutions, unlocking a high-growth opportunity for industrial real estate developers and investors in the specialised logistics sector.
