Saudi Arabia’s industrial buildout has run into a constraint its planners will not mind: the sheds are full. Property consultancy JLL’s latest reading of the Kingdom’s industrial market, published Wednesday, counts 13,660 industrial establishments as of April, up from 12,289 a year earlier, and puts occupancy of industrial and logistics space above 90 percent in all three major markets, Riyadh, Jeddah and the Dammam Metropolitan Area, through the second quarter. For most of a decade the open question over the factory program was whether tenants would materialize. The question now is where to put them.
The confirmed numbers first. The twelve months to April added 1,371 establishments to the national register, with 322 new industrial licenses issued and 188 factories entering production. Rents followed the occupancy. Dammam recorded the sharpest increase at 6.9 percent, Jeddah rose 4.8 percent and Riyadh 3.9 percent, with Industrial Gate City on the capital’s edge commanding the top rate at SR300 per square meter a year. The National Industrial Strategy’s target sits at roughly 36,000 plants by 2035, against 7,206 when the strategy’s baseline was set in 2016.
Occupancy above 90 percent is, in practice, full. Industrial tenants do not churn the way office tenants do; a factory that cannot find space defers expansion or pays what the market asks. That is what the rent numbers record. They are also the mechanism by which the shortage corrects, since industrial development is priced on yield, and rising rents on full sheds are the signal that pulls developers into building new stock. The geography of the increases carries its own information: the fastest growth is in Dammam, hinterland of the eastern industrial economy around Jubail and the Gulf ports, where the established heavy-industry base is competing for the same warehousing as new entrants.
Read alongside Tuesday’s customs data, the occupancy figures sharpen a question the trade numbers left open. June’s release showed imports of machinery and electrical equipment, a quarter of the Kingdom’s import bill, down 20.4 percent from a year earlier, a fall that could mean either a pause between procurement cycles or localization doing its work. An industrial register growing 11 percent a year while equipment imports contract is easier to square with the second reading. More factories running on less imported kit implies some of the kit is now made at home, which is the substitution the strategy exists to produce. One quarter of property data does not settle the question, but it moves the weight of evidence.
The logistics half of the market has its own driver. JLL notes that shifts in regional shipping patterns have concentrated more cargo on the Kingdom’s western gateways, Jeddah Islamic Port and King Abdullah Port, and that Mediterranean Shipping Company’s Middle East Express now links both directly to Europe. The port authority added another line Wednesday: Mawani announced Ocean Network Express’s RC2 service at Jeddah Islamic Port, connecting Shanghai, Ningbo and Nansha with Aqaba and Sokhna at up to 1,643 containers a call. The capacity is modest. The pattern is not. Every service that touches Jeddah converts sailings into onshore demand for warehousing, consolidation and trucking, and the port that June’s trade data showed handling 37.2 percent of the Kingdom’s imports is adding a 2.6-million-container terminal under the agreement CMA CGM and Red Sea Gateway Terminal signed in Paris last week.
The strategy’s arithmetic is where the pressure will stay. Reaching 36,000 establishments by 2035 from 13,660 today requires adding roughly 2,500 a year for nine years, about double the pace the register just recorded. Doubling the intake of an industrial system whose existing space is more than 90 percent occupied is, before anything else, a land and construction problem. The occupancy data suggests the market has noticed: the return on building industrial space in the Kingdom is being repriced upward in every major market at once.
The numbers to watch next sit on the supply side, the pipeline of new industrial stock in the second half and whether Dammam’s rent growth pulls development eastward. Demand, for once, is the settled part of the story.