Warehouse & Logistics Market Overview JEDDAH H 205 Jeddah Warehouse & Logistics Market Overview 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 0% in 20. Demand for warehouses and logistics facilities in Jeddah has remained healthy with 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 0,000 sqm in size. Market-wide occupancy continued to increase as activity levels remained high in H 205. 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. district s share of Jeddah s warehouse market was estimated at 75% in H 205. This is mainly due to limited availability of large and vacant lands in other industrial submarkets within the city. Overall, lease rates remained unchanged across the major industrial submarkets in Jeddah, with the exception of central and south areas where rentals edged up moderately at an annualised rate of % to reach an average of SAR 60 per sqm in Q/205. 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.
Jeddah Industrial Landscape Haramain Road Al Nakhil Al Nakhil Madinah Road Madinah Road Asfan Road th th Asfan Al Hijrah Road Haramain Road 2 2 Al Kawthar Al Kawthar Asfan Asfan Al Khomrah Asfan Road King Faisal Road 5 5 Qwaizah Qwaizah Al Laith Road Al Khomrah Haramain Rd Al Laith Road RED SEA KAIA 2 Al Kawthar Red Sea Kawthar An Nuzha An Nuzha Population POPULATION Center CENTRE JIP King Faisal Rd. st Al Manar Al Nakhil Nakhil 5 Qwaizah Industrial Hub Warehouses Industrial Hub District Industrial x Warehouses City District Transportation x Industrial City Logistics Corridors x Transportation 2th th Logistics Corridors Population Centre King Faisal Road Al Khomrah Al Laith Road Braiman Road Jeddah Makkah Highway Source: Colliers International 205 Recent Market Development As 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 206. 2 Warehouse & Logistics Market Outlook H 205 JEDDAH
Manufacturing Sector Breakdown of Factories in KSA 5% Breakdown of Factories by Region The Makkah region had,296 operating factories in 20, accounting for 9% 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,296 factories in Makkah province, it is estimated that approx.,000 factories are located in Jeddah representing 77% of the total. All major industrial indicators exhibited continuous upward growth between 2009 and 20, across key performance indicators including: total finance (in SAR mn) number of operating properties and total number of workers. 2% 9% 6,87 % Source: Ministry of Commerce and Industry, 20 Riyadh Makkah EP Operating Factories Other Regions Regions No. of Factories CAGR CAGR Total CAGR No. of Finance 09- Workers 09- (in SAR Mn) 09- Riyadh 2,975 % 67,25 % 8,0 % Makkah,296 2% 25,96 8% 6,6 7% EP,557 9% 27,608 % 607,59 26% Other Regions,0 9%,9 6%,500 0% Total 6,87 9% 95,256 2% 99,287 20% Makkah Share 9% 2% % Sources: Ministry of Commerce and Industry, 20 2 Warehouse & Logistics Market Outlook H 205 JEDDAH
x Industrial Cities:. Jeddah st Industrial City 2. Jeddah 2 nd Industrial City. Jeddah rd Industrial City. Jeddah th Industrial City Jeddah Modon Authority is currently developing the th 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. Sources: Modon 205, Colliers international 205 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 rd and th Industrial City. Approximately 5 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. 9% of all factories in Modon industrial cities across the Kingdom. 2 Areas to Watch: 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 st 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 2 nd and rd Industrial Cities which are anticipated to become new manufacturing hubs of Jeddah. Moreover, the inception of the th Industrial City by Modon is expected to attract industrial development toward the north-east of Jeddah, within the wider area of Asfan. 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. Market Indicators year-on-year change (Q2 20 - Q2 205) North Central South Bin Yaakoub / Nakheel Shamaa / Nakheel Absorption Construction Rental Rate Occupancy Source: Colliers International, 205 2 Warehouse & Logistics Market Outlook H 205 JEDDAH
Summary Research (H2/205): Warehouse & Logistics space by Districts (205) % The lease rates and occupancy levels of warehouses located in north 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 recorded near full occupancy, while their similar properties in the south registered vacancy rates of between 0% and 5%. This vacancy is attributed to recently completed speculative development projects that have not yet been absorbed by the market. 5% 8% 6% 5% 75% Al Khomra Qwaizah Al Nakhil Al Kawthar Al Nuzha* Al Manar* 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 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 th Industrial City & Workshops Masterplan. Furthermore, will continue drawing interest from commerce and trading companies due to the availability of a variety of warehouses and close proximity to the port. Asking Warehouse Lease Rate Average Occupancy (%) Serviced Land Sale Price Lease (SAR/Sqm/Annum) 50 00 250 95% 90% 95% 95% 90% 500 000 2 500 Sale (SAR/Sqm) 200 2 000 50 500 00 000 50 500 0 North Central South Bin Yaakoub / Nakheel Shamaa / Nakheel 0 Source: Colliers International, 205 52 Warehouse & Logistics Market Outlook H 205 JEDDAH
Prevailing Trends Typical warehouse size by district (sqm) 000 2 000 000 000 5 000 6 000 7 000 8 000 9 000 0 000 Source: Colliers International, 205 Trend Spotlight Central & South Al Khomra c.2,000-0,000+ Qwizah c.,000-5,000 Bin Yaakoub Nakheel c.500-5,000 Al Kawthar c.500-5,000 Shammaa-Nakheel c.500-2,000 North Al Khomra c.00-,000 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. Sector Trends: 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 Drivers Demand 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. FACTOR IMPLICATION RETAIL > High purchasing power > Growing, young population > Positive consumer confidence Drives demand for bulk and small warehouses and L&D facilities as well as manufacturing industrial land AUTOMOTIVE > Car sales expected to reach million by 2020 > 65% of population fall under the age of 5 years > Low fuel cost Stimulates demand for warehouses, open yards, and mixed-use featuring showrooms, storage (for spare parts) and workshops (for maintenance) CONSTRUCTION > Shortage in housing units > Several large-scale infrastructure & transportation projects Increases demand for manufacturing industrial land and warehouses, workshops, and project support centres Source: Colliers International, 205 62 Warehouse & Logistics Market Outlook H 205 JEDDAH
Future Trends Short-term Low 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-term As 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-term The 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. The landscape of the industrial sector in Jeddah will witness a structural change characterized by three stages. 2 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. 7 Warehouse & Logistics Market Outlook H2 205 JEDDAH
502 offices in 67 countries on 6 continents $2. billion in annual revenue over 6,00 professionals 5,700 brokers $97 billion in transaction volume across more than 8,000 sale and lease transactions over.7 billion square feet under management (excluding residential properties) For further information, please contact: Ian Albert Regional Director, Middle East MAIN +97 5 700 ian.albert@colliers.com Imad Damrah Managing Director, Saudi Arabia MAIN +966 27 7775 MOBILE +966 50 7 278 imad.damrah@colliers.com Khalid Smadi Director, KSA Western Region MAIN +966 2 60 5900 MOBILE +966 55 999 765 khalid.smadi@colliers.com Mhd-Haydar Kouzbari Associate Manager MAIN +966 2 60 5900 MOBILE +966 50 722277 haydar.kouzbari@colliers.com Colliers International P.O Box 5678 Riyadh 2 Kingdom of Saudi Arabia Colliers International Middle East Colliers International has been providing leading advisory services in the Middle East and North Africa region since 996, and in Saudi Arabia since 200. Regarded as the largest and most experienced firm in the region, Colliers International s expertise covers Hospitality, Residential, Industrial, Commercial, Retail, Education and Healthcare sectors together with master planning solutions, serviced from the five regional offices. Colliers Research Services Group is recognized as a knowledge leader in the real estate industry, providing clients with valuable market intelligence to support business decisions. Colliers research analysts provide multi-level support across all property types, ranging from data collection to comprehensive market analysis. www.colliers.com Copyright 205 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.