Saudi Arabia’s logistics sector sees rapid growth under Vision 2030

 

Saudi Arabia’s logistics sector witnesses fast progress under Vision 2030

Saudi Arabia's logistics and warehousing industry is undergoing rapid growth, driven by the National Industrial Development and Logistics Program (NIDLP) under Vision 2030, a new whitepaper by JLL reveals. The expansion is being fueled by booming e-commerce demand and an increasing need for high-quality, Grade A warehousing facilities.

Titled Emerging Trends Shaping Saudi Arabia’s Logistics and Warehousing Market, the report outlines key factors driving this growth, highlighting both challenges and opportunities as the Kingdom seeks to become a global logistics hub. It also underscores the strong investment interest from both local and international institutional players, positioning the logistics sector as a cornerstone of Saudi Arabia’s economic diversification strategy.

Vision 2030 aims to position Saudi Arabia among the top 10 countries in the Logistics Performance Index, while the NIDLP is focused on boosting the sector’s GDP contribution and localizing 70% of the supply chain. The country is making significant investments in infrastructure, regulatory frameworks, and streamlined processes to create a robust logistics ecosystem.

 

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Abhishek Mittal, Head of Industrial Advisory, MENA at JLL, explains: “Saudi Arabia’s strategic location offers unparalleled access to a growing consumer base across three continents, making logistics and warehousing essential for high-growth sectors. Guided by Vision 2030, the Kingdom is enhancing its infrastructure, prioritizing sustainability, and forging strong partnerships for seamless global commerce. This adaptable and resilient logistics network is offering investors significant opportunities, with reduced costs and efficient supply chains facilitating access to a rapidly expanding market.”

The whitepaper highlights several key drivers, including the establishment of Special Economic Zones (SEZs) and industrial cities. With 36 industrial cities providing ready-built factories, warehouses, and logistics facilities, areas like King Abdullah Economic City (KAEC), King Salman Energy Park (SPARK), and Jazan Economic City (JEC) are attracting substantial investment and driving economic growth. These regions offer tax incentives, fostering clusters of activity that are pivotal to innovation.

Grade A Warehouses and International Investment

The demand for industrial and logistics space is shifting, with global institutional investors increasingly moving towards high-quality Grade A facilities. JLL’s report notes that traditional Grade B/C warehouses, which make up about 90% of the market, are being phased out in favor of more sophisticated offerings like built-to-suit warehouses, cold storage facilities, and last-mile delivery hubs. Major players such as DP World, Gulf Islamic Investments, Arcapita, and AP Moller–Maersk are leading this change, underscoring the growing confidence in the Saudi market.

 

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Saudi Arabia's logistics market is further buoyed by its status as the largest e-commerce market in the GCC, supported by high internet penetration (97%), a young, tech-savvy population, and a shift towards online shopping. E-commerce is expected to contribute around 80% to the retail sector by 2030, driving demand for modern warehouses, fulfillment centers, and last-mile hubs.

E-Commerce and Specialized Logistics Drive Demand

Institutional investors are increasingly focusing on built-to-suit logistics parks designed to meet the needs of e-commerce and retail tenants. Real estate investment trusts (REITs) are allocating more capital to logistics assets, recognizing the growth potential in these areas.

The whitepaper also identifies the food and pharmaceutical sectors as key industries driving the need for specialized logistics solutions. With Saudi Arabia importing 80% of its food and having one of the largest pharmaceutical markets in the Middle East, the demand for cold chain storage and temperature-controlled warehousing is soaring. Additionally, the growing trend of online grocery and food delivery is further boosting the need for advanced supply chain solutions, offering significant growth opportunities for industrial real estate developers.

Sustainability Challenges and the Path Forward

Despite the opportunities, the report highlights the challenges of aligning with sustainability goals under Vision 2030. The industrial and logistics sectors in Saudi Arabia are traditionally energy-intensive, and companies must adapt to minimize environmental impact while achieving long-term savings. Those who successfully navigate this transition will be well-positioned for success in the Kingdom’s evolving market.

 

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The ongoing construction boom, which has injected approximately USD 850 billion into the industry, presents its own set of challenges, particularly for global supply chains. To strengthen supply chain resilience, businesses are diversifying their strategies by investing in local manufacturing, optimizing inventory, and leveraging digital technologies such as RFID tracking and GPS monitoring.

The Road Ahead

Technological innovation, strategic partnerships, and the shift towards local production are crucial to ensuring long-term growth and sustainability in Saudi Arabia’s logistics and industrial sectors. Investments in port expansions, rail networks, and industrial zones are also vital for positioning the Kingdom as a global logistics hub, supporting the rapid growth of its logistics and industrial capabilities in line with Vision 2030.

Source: www.cbnme.com