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JEDDAH
Jeddah’s warehouse and logistics market is currently undergoing a major redevelopment, driven by the government’s objective to increase industrial contribution to the GDP to 20% in 2020 from 10% in 2013.
“The supply
of warehouses
and logistics & distribution
centres is primarily
concentrated near
industrial hubs
(industrial cities),
transport/infrastructure
projects (seaport
and airport), and
logistics corridors.
These areas
are mainly located
south-east of the city.”
Warehouse & Logistics Market Overview
JEDDAH H1 2015
Jeddah Warehouse & Logistics Market Overview
Demand for warehouses and logistics facilities in Jeddah has remained healthy with Al-Khomra submarket being the main focus of activity.
Central and southern areas in the Al Khomra submarket witnessed the completion of a handful of development projects mostly dominated by large warehouses exceeding 10,000 sqm in size.
Market-wide occupancy continued to increase as activity levels remained high in H1 2015. The construction, retail and automotive sectors all witnessed an increase in inquiries off the back of increased consumer spending and job creation, coupled with rising government investment in infrastructure /transportation projects.
Overall, lease rates remained unchanged across the major industrial submarkets in Jeddah, with the exception of central and south Al-Khomra areas where rentals edged up moderately at an annualised rate of 3% to reach an average of SAR 160 per sqm in Q1/2015.
Al-Khomra district’s share of Jeddah’s warehouse market was estimated at 75% in H1 2015. This is mainly due to limited availability of large and vacant lands in other industrial submarkets within the city.
432 Warehouse & Logistics Market Outlook | H1 2015 | JEDDAH
Mad
inah
Road
King
Fais
al Rd
.
Population Center
Al Nakhil
Qwaizah
Al Kawthar
Asfan
Warehouses DistrictIndustrial CityTransportationLogistics Corridors
1st
4th
KAIA
JIP
Industrial Hub
RED
SEA
Al Manar
An Nuzha
1
Al L
aith
Road
Al Kawthar
Asfan
Al Nakhil
Qwaizah
Al Khomrah
4
2th 3th
1
2
3
4
5
1
2
3
4
5
Mad
inah
Roa
d
Asfan Road
Braiman Road
Jeddah Makkah Highway
King
Fai
sal R
oad
Al L
aith
Roa
d
Al Hijrah Road
An Nuzha
KAIA
JIP
Al Kawthar
Al Kawthar
Asfan
4th3
2
Al Nakhil
Qwaizah
Al Khomrah
Al ManarPOPULATION CENTRE
Red Sea
1
5
1st
4
3th2th
Industrial Hub
Warehouses District
Industrial City
Transportation
Logistics Corridors
Population Centre
x
x
x
Haramain Road
Al Nakhil 1
Haramain Road
2
Asfan Road
Asfan
4
3
King
Fai
sal R
oad
Al L
aith
Roa
d
Al Khomrah
1
4
Qwaizah
5 Haramain Rd
Jeddah Industrial Landscape
Recent Market DevelopmentAs part of Jeddah’s municipal plans and initiatives to improve the northern front adjacent to KAIA, An Nuzha industrial district is expected to be demolished and relocated to a masterplan comprising workshops & light industries
in Asfan. The project will occupy 5 million sqm of land dedicated to fully-fledged workshops, car showrooms, and light industries including aluminum, carpeting, and furniture. It will be developed by JDURC together with private investors and developers. Construction is expected to be completed in 2016.
Source: Colliers International 2015
432 Warehouse & Logistics Market Outlook | H1 2015 | JEDDAH
Sources: Ministry of Commerce and Industry, 2014
Source: Ministry of Commerce and Industry, 2014
Riyadh Makkah EP Other Regions
Breakdown of Factories in KSA
43%
19%
23%
15%
Manufacturing Sector
All major industrial indicators exhibited continuous upward growth between 2009 and 2014, across key performance indicators including: total finance (in SAR mn) number of operating properties and total number of workers.
Breakdown of Factories by RegionThe Makkah region had 1,296 operating factories in 2014, accounting for 19% of the total number of factories in KSA. Riyadh and the Eastern Province have a combined share of 66%, primarily due to the large population base in Riyadh and the greater presence of major oil and petrochemical companies based in the Eastern province.
Out of the 1,296 factories in Makkah province, it is estimated that approx. 1,000 factories are located in Jeddah representing 77% of the total.
Operating Factories6,871
Regions No. of Factories
CAGR No. of Workers
CAGR Total Finance
(in SAR Mn)
CAGR
09-14 09-14 09-14
Riyadh 2,975 11% 367,245 14% 118,011 13%
Makkah 1,296 2% 215,964 8% 136,316 17%
EP 1,557 9% 237,608 13% 607,459 26%
Other Regions 1,043 9% 114,439 16% 131,500 10%
Total 6,871 9% 935,256 12% 993,287 20%
Makkah Share 19% 23% 14%
432 Warehouse & Logistics Market Outlook | H1 2015 | JEDDAH
4
x
1
32
Industrial Cities:
1. Jeddah 1st Industrial City 2. Jeddah 2nd Industrial City 3. Jeddah 3rd Industrial City 4. Jeddah 4th Industrial City
Jeddah
Modon Authority is currently developing the 4th Industrial City spanning a total land area of 5 million sqm. The Municipality of Jeddah is planning to develop a workshop / light industrial masterplan also measuring 5 million sqm. Upon their completion, these masterplans are expected to attract industrial developments toward the Asfan submarket in the northeast.
Industrial Cities in Jeddah Jeddah houses four industrial cities wih 556 factories, the number of factories in Jeddah will likely increase upon the completion of the 3rd and 4th Industrial City.
Approximately 45 million sqm of land has been allocated for the development of industrial cities. Of this, 25 million sqm has already been developed with the remaining 20 million sqm still in the construction pipeline.
The development and management of industrial cities in KSA is managed by Modon, a quasi-government organisation that promotes investment and job creation in industrial manufacturing sector through development of industrial cities. Additionally, Modon supervise and oversee private industrial cities in the Kingdom. Modon Industrial Cities feature subsidised serviced lands and pre-fabricated factories supplemented with integrated infrastructure and services.
Jeddah warehouses account for approx. 19% of all factories in Modon industrial cities across the Kingdom.
Colliers’ View
Unlike Riyadh which has witnessed unprecedented private development of industrial cities, demand for Jeddah’s manufacturing sector is principally addressed by Modon, Modon is currently developing approximately 25 million sqm of industrial land dedicated to manufacturing which enjoys subsidized rental rates. This will likely temper private sector interest in the segment.
Areas to Watch:
Source: Colliers International, 2015
Market Indicators year-on-year change (Q2 2014 - Q2 2015)
North Al-Khomra
Central Al-Khomra
South Al-Khomra
Bin Yaakoub / Nakheel
Shamaa / Nakheel
Absorption
Construction
Rental Rate
Occupancy
Sources: Modon 2015, Colliers international 2015
Historically, Jeddah has been the industrial base for the logistics,
light industry and FMCG sectors, with the supply of warehouses and
logistics & distribution (L&D) centres mainly concentrated in Khomra District in south Jeddah, near the 1st Industrial City and Jeddah Islamic Port.
Recently the area has expanded southwards along King Faisal Street and towards the east and north-east along Al Laith Road as well as Haramain Road.
In the future, supply is expected to expand moderately south toward the 2nd and 3rd Industrial Cities which are anticipated to become new manufacturing hubs of Jeddah. Moreover, the inception of the 4th Industrial City by Modon is expected to attract industrial development toward the north-east of Jeddah, within the wider area of Asfan.
5432 Warehouse & Logistics Market Outlook | H1 2015 | JEDDAH
The lease rates and occupancy levels of warehouses located in north Al-Khomra sub-districts such as Soriryah masterplan, are higher than those in the south due to their proximity to Jeddah Islamic Port and First Industrial City, as well as the city centre.
Warehouses located in north Al-Khomra recorded near full occupancy, while their similar properties in the south registered vacancy rates of between 10% and 15%. This vacancy is attributed to recently completed speculative development projects that have not yet been absorbed by the market.
The limited supply of warehouses and vacant land in the Nakheel submarket, combined with its strategic location on a major logistics corridor, yet within close proximity to population and work centres has boosted rentals, resulting in an average premium in lease rates of approx. 50% over the Al-Khomra submarket.
Industrial land parcels offered for sale in the market are mostly serviced plots permitted for storage use. Infrastructure work for these plots is provided and generally includes electricity, water, and sewage systems.
Colliers’ View
The warehouse and logistics supply structure in Jeddah is on the verge of change as An-Nuzha is expected to be demolished and relocated to Asfan area, which is expected to emerge as a prominent industrial hub upon the inception of the 4th Industrial City & Workshops Masterplan. Furthermore, Al-Khomra will continue drawing interest from commerce and trading companies due to the availability of a variety of warehouses and close proximity to the port.
Summary Research (H2/2015):
Warehouse & Logistics space by Districts (2015)
Al Khomra Qwaizah Al Nakhil Al Kawthar Al Nuzha* Al Manar*
5%
75%
8%
6%5%
1%
350
300
250
200
150
100
50
0
3 500
3 000
2 500
2 000
1 500
1 000
500
0North
Al-KhomraCentral
Al-KhomraSouth
Al-KhomraBin Yaakoub / Nakheel
Shamaa / Nakheel
Leas
e (S
AR/S
qm/A
nnum
)
Sale
(SAR
/Sqm
)
Asking Warehouse Lease Rate Average Occupancy (%) Serviced Land Sale Price
95%
90%95% 95%
90%
Source: Colliers International, 2015
6432 Warehouse & Logistics Market Outlook | H1 2015 | JEDDAH
1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000
Prevailing Trends Typical warehouse size by district (sqm)
Sector Trends:
Trend Spotlight
“Districts concentrated on the southern outskirts of the city primarily feature large and mid-sized warehouses used by prominent commerce and trading companies as their central storage units. Conversely, industrial districts situated within close vicinity to population / work centres generally feature small warehouses catering mainly to demand generated by distributors, retailers, and workshop owners.”
Source: Colliers International, 2015
Source: Colliers International, 2015
The construction, automotive, retail and public sectors are the major drivers of demand for warehouses and L&D (logistics & distribution) facilities in Jeddah as the majority of existing occupiers relate to these sectors.
Mixed-use warehouse developments that feature office-warehouse or retail-warehouse are very limited in Jeddah and are principally concentrated in the Nakheel submarket.
Unlike other major logistics hubs globally or regionally, warehouses in Jeddah offer limited options in terms of specifications, finishing quality, variety of offerings, support services, automation etc. However, it is considered more advanced and larger in size relative to other Saudi cities.
In recent years we have seen developers commence work on warehouse developments of a significant size, in contrast to the smaller warehouse projects that were typical in the past. However, these projects are mainly concentrated in the central and southern districts of Al Khomra due to availability of reasonably priced and large parcels of vacant land.
Speculative warehouses continue to dominate the market, where developers construct projects without securing a tenant. Built-to-suit and pre-let arrangements continue to be very limited, with the majority of supply comprising owner occupied premises.
Demand DriversDemand Drivers of Industrial & Warehouse Space
“The construction, retail, and automotive sectors will continue to account for the majority of demand for warehouse space and manufacturing land in Jeddah.”
> High purchasing power> Growing, young population > Positive consumer confidence
FACTOR
Drives demand for bulk and small warehouses and L&D facilities as well as manufacturing industrial land
IMPLICATION
> Car sales expected to reach 1 million by 2020
> 65% of population fall under the age of 35 years
> Low fuel cost
Stimulates demand for warehouses, open yards, and mixed-use featuring showrooms, storage (for spare parts) and workshops (for maintenance)
> Shortage in housing units> Several large-scale infrastructure
& transportation projects
Increases demand for manufacturing industrial land and warehouses, workshops, and project support centres
CONSTRUCTION
AUTOMOTIVE
RETAIL
North Al Khomra
Shammaa-Nakheel
Bin Yaakoub –Nakheel
Qwizah
Al Kawthar
c.300-1,000
c.500-2,000
c.500-5,000
c.1,000-5,000
c.500-5,000
c.2,000-10,000+Central & South Al Khomra
7 Warehouse & Logistics Market Outlook | H2 2015 | JEDDAH
Future Trends Short-termLow quality warehouses are expected to receive less attention in the coming years as prospective tenants will likely favour better designed, sustainable, high quality premises.
Professional developers will likely target the industrial sector in Jeddah in the near term, as market activities in other real estate sectors, such as residential segment are currently slowing down, due to the recent tax imposed on white land.
Medium-termAs tenants increasingly opt for showrooms/warehouses with good access and visibility, it is anticipated that well located mixed-use development projects will drive demand in the medium-term.
It is also anticipated that there will be more developments of large-scale Built-to-suit (BTS) warehouse and L&D on a pre-let basis as this sector is currently undersupplied. This will likely create new opportunities for professional developers.
Long-termThe potential future growth of e-commerce is expected to become a major driver of change in the logistics sector. This fundamental shift will likely create a wave of demand for new types of logistics facilities. However, the Saudi e-commerce sector is still nascent and is expected to develop slowly.
Once King Abdullah Port reaches its targeted capacity and the Industrial Valley becomes fully operational and developed, King Abdullah Economic City will rival Jeddah as a prominent logistics base drawing demand for transhipment, export and re-export business as well as large-scale warehouse and logistics projects.
Stage one will be characterized by the entry of professional developers to the market and tenants are expected to start favouring sustainable and higher quality products.
Stage two will see the emergence of mixed-use projects and large BTS logistics facilities.
Finally, in stage three, the e-commerce sector will emerge and KAEC will begin to rival Jeddah as a prominent logistics base. However, Jeddah Islamic Port is expected to continue leading in import and export trade given its proximity to a large customer and population base.
1
2
3
The landscape of the industrial
sector in Jeddah will witness
a structural change characterized
by three stages.
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Copyright © 2015 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
For further information, please contact:
Ian AlbertRegional Director, Middle EastMAIN +971 4 453 [email protected]
Imad DamrahManaging Director, Saudi ArabiaMAIN +966 11 273 7775 MOBILE +966 50 417 [email protected]
Khalid SmadiDirector, KSA Western RegionMAIN +966 12 610 5900 MOBILE +966 55 999 [email protected]
Mhd-Haydar KouzbariAssociate ManagerMAIN +966 12 610 5900 MOBILE +966 50 [email protected]
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