While 10.1 million square metres 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, Managing Director Saudi Arabia, Colliers International, 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 of Saudi Arabia, 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% increase from a range of 550-700 to a range of SAR 600 to SAR 780 per square metre.

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% increasing from SAR 150 to SAR 160 per sqm for average-quality facilities featuring standard specifications with a per square metre rental rate ranging between SAR 130 to SAR 220, and occupancy levels reaching 91%.

Commenting on the warehouse and logistic 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 fully fledged integrated distribution centres that include logistics’ facilities, cold-storage, dry-storage and supporting retail facilities.”