Underpinned by modern infrastructure and its strategic position close to Europe, Africa and other nearby land-locked countries, the Middle East’s industrial, manufacturing and logistics exports have soared in recent years.
The Middle East economy heavily relies on targeted processing, production and logistics facilities. Additionally, with a booming demand for consumer goods and tax incentives, the local market is becoming a magnet for overseas industrial and manufacturing operations.
Healthy industrial, manufacturing and logistics sectors are vital for the future of the regional economy as it continues its transition away from reliance on oil and gas exports towards a more diversified economy.
Recent development of numerous free zones and industrial clusters serve as evidence that the Middle East has embarked on a trajectory of developing into a leading industrial economy. The region is optimising the use of its contemporary infrastructure and distribution channels, which includes three of the world’s most far-reaching airlines – Emirates, Etihad and Qatar.
Despite the impact of COVID-19 on the overall construction industry, the positioning of the Middle East as a global hub and KSA’s rapid expansion with its numerous Giga-Projects, the warehousing industry is expected to continue its rapid growth across the region.
Qatar is aiming to become a global trading hub by attracting foreign direct investment to take its logistics capabilities to the next level. The lifting of the trade embargo in early 2021 (which commenced in 2017 when various Middle Eastern nations imposed sanctions on Qatar) is expected to continue to ease pressures on import costs for plant and materials, which should reduce the construction cost of warehouses.
Qatar’s recently-established free zones, located close to Hamad International Airport and Hamad Port, are designed to attract companies seeking infrastructure that serves trading routes between Asia and Europe.
Grade A industrial and warehousing space continues to be in strong demand as e-commerce continues to fuel growth. Despite this, some developers remain hesitant as tenants push for lower rents and better contract terms.
In order to attract international investment into the region, the UAE is now home to 45 free trade zones with a further ten under construction. These zones include industrial clusters intended to increase the ease of imports and exports, bolstering warehousing demand.
Saudi Arabia has seen its non-oil industrial output rise dramatically in recent years across key sectors such as petrochemicals, plastics, metal, construction materials and electrical appliance manufacturing.
The Kingdom is investing heavily in logistics as part of Vision 2030, with the sector forecast to represent 33 percent of the Kingdom’s economy by the end of the decade.
Despite the surge in commercial development in KSA from the Public Investment Fund (PIF) and the many Giga-Projects underway, the impact of COVID-19 on the warehousing sector has been profound. The tripling of VAT to 15 percent and increase of import taxes has cooled demand for warehousing despite government interventions to support SMEs in the sector.
Head of Cost Management, UAE