Saudi Arabia Industrial and Logistics sector
Consumer trends are constantly evolving and as a result many industries are undergoing a transformation to ensure that they adapt to meet current and future demands.
01 Jun 2020
The logistics sector is one of the many industries that is developing to address the challenges and opportunities presented by changing consumer habits in the digital age. E-commerce is on the rise, with same day delivery is becoming the norm. As a result, businesses and consumers alike expect their deliveries faster, and in many instances, at no cost at all.
The pressure faced by the industrial and logistics sector in relation to these trends is immense. However, growing consumer expectations are not the only factor driving the sector’s transformation. Technology, new market entrants and the de-globalization of the supply chain are all key components contributing to the evolution, and even revolution, of this industry.
We look at the key trends that will define the logistics sector in KSA in the coming years and the impact that this growing sector will have on the further development of Saudi Arabia as a regional strategic hub. It will also consider the vital role that the sector will have on supporting other industries in line with Saudi Vision 2030.
Key global trends
E-commerce driving logistics demand
Expansion of e-commerce is driving demand for industrial and logistics space – especially space near urban centres. E-commerce is also supporting demand for alternative industrial products, such as multi-storey warehouses and infill service centres.
Technology & innovation shaping occupier requirements
Technologies, such as self-driving vehicles, robotics, automation and artificial intelligence, are increasing the efficiency of global distribution systems whilst shaping space requirements.
De-globalisation of supply chains impacting logistics locations
In major cities around the world, demand for quality logistics space is outpacing supply and driving up rental prices. This trend is expected to continue; however, access to land, particularly in proximity to key population centres, remains a challenge.
KSA’s Industrial & Logistics Sectors
As Saudi Arabia continues to diversify its economy in line with its vision to reduce its reliance on oil, several sectors have been identified as key drivers of growth. The logistics industry, although relatively new in the Kingdom, has been named as a ‘game changer’ in enabling the country to achieve its long-term diversification objectives.
Saudi Arabia has key natural attributes that enable it to compete with top players in the region. In addition to being the largest economy in the Middle East, KSA also benefits from a central location that allows for optimal distribution to the GCC, wider Middle East region, and North and East Africa – as well as residing on the Asia-to-Europe trade route.
To ensure the continued success of the country’s growing logistics sector, the Saudi Government has introduced a nine-point transformation strategy that includes:
- E-commerce driving logistics demand
- Investing in digital technology
- Implementing a sophisticated transport infrastructure plan
- Reforming the rail sector and improving seaport efficiency
Regulatory reforms through the promotion of public-private sector partnerships and facilitating foreign investment is also a key aspect of Government plans to boost the sector. Such reforms are expected to play a critical role in enabling the sector to flourish and supporting KSA’s plans to develop into a world-class logistics hub.
National Industrial Development and Logistics Program (NIDLP)
In January 2019, Saudi Arabia announced plans to spend SAR 100 billion (USD 28 billion) in 2019 and 2020 as part of its industrial strategy, aimed at creating 1.6 million jobs and attracting SAR 1.6 trillion in investment by 2030. The National Industrial Development and Logistics Programme covers 42 initiatives aimed at stimulating activity across key sectors including mining, logistics, energy and industry.
The Programme also pledged to explore all opportunities presented by the fourth industrial revolution through research and innovation. As part of these plans, the Saudi Government also stated its intention to develop and operate logistics zones close to major ports with investment opportunities worth SAR 7 billion.
Key upcoming projects
- Tharwat logistics city, Riyadh
- Integrated logistics bonded Zone, Riyadh
- Asfan Smart Industrial City 2, Jeddah
- King Salman Energy Park (SPARK) Al Ahsa, Eastern Province