Riyadh industrial sector records bullish growth

Riyadh industrial sector records bullish growth
Updated 27 August 2014

Riyadh industrial sector records bullish growth

Riyadh industrial sector records bullish growth

Riyadh’s industrial manufacturing sector showed solid performance over the last year up to the second quarter of 2014, as strong demand fundamentals combined with increased public and private sector spending pushed up the average sales price of manufacturing land in private industrial cities and average rental rates of dry-storage space.
While 10.1 million square meters of manufacturing land is anticipated to enter the market by 2018, Colliers International’s Riyadh Industrial Market Overview highlights that demand will remain strong driven by solid economic fundamentals, a burgeoning population and government plans to increase the economic contribution of the industrial sector.
Imad Damrah, Colliers International’s MD for Saudi Arabia, said: “Despite Riyadh’s industrial master plan’s large forthcoming supply we expect demand for manufacturing space to maintain solid growth momentum. With a population nearing 6 million and the highest GDP in the Kingdom, Riyadh continues to attract and promote investment in industrial and supporting logistics facilities.”
The report indicates that while the influx of supply will have a marginal impact on the market’s take-up level owing to strong fundamentals, it is anticipated that tenants will place more focus on the quality of infrastructure and demand different forms of financing and ownership/leasehold structures.
The forthcoming supply is also expected to decelerate the rate of growth in sales prices of manufacturing lands which last year witnessed as 9 percent increase from a range of SR 550-700 to a range of SR 600-780 per square meter.
Riyadh’s warehouse and logistics sub-sector also witnessed a strong performance during the quarter with average rental rates of dry-storage spaces seeing a year-on-year increase of 6 percent, rising from SR150 to SR160 per sqm for average-quality facilities featuring standard specifications with a per square meter rental rate ranging between SR130 and SR220, and occupancy levels reaching 91 percent.
Commenting on the warehouse and logistics market, Damrah said: “We see the sector as poised for a period of growth over the coming years as business conditions and consumer spending improves and government spending on infrastructure projects increase. The product offering of Riyadh’s warehouse and logistics sub-sector is limited relative to that of other regional markets. As such, strong demand is anticipated for full-fledged integrated distribution centers that include logistics’ facilities, cold-storage, dry-storage and supporting retail facilities.”