The Value of Warehouse Space in Saudi Arabia

Saudi Arabia is one of the world’s leading emerging markets, according to Agility’s Emerging Markets Logistics Index 2021. Renting warehouse space in Saudi Arabia can enable your business to move into this growing economic region without the high up-front costs of building infrastructure.

The high value of square meter warehouse space in Saudi Arabia reflects the opportunities it presents for expansion, efficiency, and resilience. Learn more below about the benefits of renting warehouse space, how much it costs in Saudi Arabia, and how to find the best rates.

Benefits of renting warehouse space in Saudi Arabia by the square meter

The e-commerce market is rapidly expanding around the world. According to an e-commerce market analysis from eCommerceDB, the Saudi e-commerce market grew 28 percent year over year in 2020 to reach USD $6 billion in revenue. And analysts from Statista forecast that the market will continue to experience a compound annual growth rate of 7 percent moving forward through 2024.

As e-commerce continues to grow, warehouse space and other commercial real estate are becoming more important for businesses in this market around the world, particularly in Saudi Arabia. If your company ships products to Saudi Arabia and other countries in the Middle East, renting warehouse space in the kingdom could be a valuable investment. The following are some of the potential benefits of renting warehouse space for your company’s goods in Saudi Arabia.

Better focus on core competencies

One of the greatest benefits of renting warehouse space is being able to focus on your company’s products and its primary goals. By renting warehouse space, you don’t have to worry about managing the warehouse itself, including facility maintenance. Instead, you can focus on moving your goods to consumers.

Additionally, third-party warehouses like those in Agility Logistics Parks are fully secure, with guard staff, CCTV, and sprinkler systems for fire prevention. You don’t need to worry about the theft of your goods or their accidental destruction from fire or other other catastrophes.

Fully functional facility infrastructure

Many warehouses for rent have the functional infrastructure you need to support warehouse operations. They provide reliable power, water supply, and connectivity for information technology systems. And some include temperature-controlled structures for cold storage, which is critical for food and beverage, life sciences, and health-care companies operating in one of the world’s hottest regions.

Expanded reach

Another benefit of renting warehouse space in Saudi Arabia is that it can expand your business’s reach to other large markets. Saudi Arabia represents a major retail market, which could grow around 6 percent through 2024, according to Research and Markets.

If your company does not yet have a presence in the Middle East, leasing or renting international warehouse space in Saudi Arabia makes this market more accessible.

Fast, cost-effective delivery

If you regularly ship goods and cargo to Saudi Arabia, you can improve the overall experience for your customers by placing inventory in a warehouse in the region closer to them.

Consumers expect fast delivery: in one survey from Convey, 79 percent of respondents considered two-day shipping an important factor in their shopping decisions. Having warehouses in the regions that you operate in is a key part of delivering the fast shipping that consumers have come to expect.

To add, urban centers in Saudi Arabia and across the Middle East are spread widely, often across varied and rugged typography. Renting warehouse space in these regions can close the gaps between cities, shortening delivery times for customers. You may also enjoy cost savings from carriers by storing products nearer to consumer centers in the Middle East.

Enhanced scalability

By renting space in a warehouse, your organization doesn’t have to commit to the permanent purchase of a specific amount of space. In other words, you have more flexibility to scale up or down as your business grows or focuses its offerings. Enhanced scalability will be key as retail markets in the kingdom continue to expand.

Up-front savings

Compared to purchasing or building warehouse space and developing the warehouse infrastructure you need to support your logistics operations, renting comes with relatively manageable up-front expenses and frees up your working capital. Because of that, your business will have more funds available to innovate and deliver its best products.

Resilient supply chain

Supply chain resilience measures a company’s ability to anticipate and withstand disruptions. Anticipating disruptions means more than simply predicting them; it means you’re taking steps to plan for them and, especially, to avoid them.

One step you can take to avoid supply chain issues is to rent more warehouse space to increase your inventory capacity. Holding safety stock can give you a stronger stance in the face of a supply chain disaster or disruption. In addition, spreading out your inventory across multiple warehouses can help mitigate the effects of supply chain disruptions confined to one region.

Average cost of warehouse space in Saudi Arabia by the square meter

Rental rates vary from region to region in Saudi Arabia. According to , the average annual cost of renting dry-storage warehouse space in Riyadh, Saudi Arabia, in the first quarter of 2020 was SAR 120 (USD $32) per square meter. Annual lease rates were as low as SAR 50 (USD $13) per square meter and as high as SAR 250 (USD $67) per square meter.

In Jeddah, Saudi Arabia, the average price of warehouse space was SAR 131 (USD $35) per square meter in the first quarter of 2020, according to Colliers International. Contact Agility’s contract logistics team to get a quote for warehousing space in Saudi Arabia.

Factors that affect the cost of warehouse rental rates in Saudi Arabia

In addition to location, accessibility, and facility condition, the value of square meter warehouse space in Saudi Arabia depends on several other factors. These include inventory volume, type of goods, storage specifications, and others. Warehouse rents typically increase the closer to urban centers you need to store your goods.

Some of the costs and fees you might have to pay while renting warehouse space include the following:

• Utility costs. In addition to the monthly rent rate, you may have to pay ongoing storage costs—such as electricity—while you use the warehouse. Many warehouses calculate these storage fees per pallet.
• Receiving costs. Some warehouses charge receiving fees per shipment, while others charge this fee per pallet. In some cases, the warehouse’s base rental rate might include the receiving charges.
• Fulfillment charges. A warehouse might charge this fee for packing and shipping your products. Typically, warehouses calculate this fee on a per-item basis.
• Kitting charges. If some of your items require assembly prior to shipping, a warehouse may charge kitting fees per item or per hour.

When comparing rates, it’s helpful to estimate as accurately as possible your business’s turnover rate and possible future expansions.

Considerations for finding the best price for warehouse space in Saudi Arabia

The main factors that determine a warehouse’s rental rate are the facility’s floor area, the rental rate in dollars per square meter, and the estimated operating expenses.

The above costs may add onto the base monthly rent, so it’s important to look closely at the rental agreement and discuss it with the warehouse owner before signing. Make sure you understand exactly what you’ll owe, which costs the monthly rental rate includes, and which fees you might eventually face for different materials or inventory volumes.

Number of square meters you’ll need in a Saudi Arabian warehouse

Calculating the amount of warehouse space that your business needs involves estimating the amount of goods you plan to store and understanding your utilization rate.

Determining how many square meters of warehouse space you’ll need

The following are some factors to consider when estimating warehouse space requirements:

• Number and size of pallets
• Ability to stack pallets vertically
• Number and variety of stock-keeping units (SKUs)
• Predicted growth in volume or variety of SKUs
• Expected inventory turnover
• Utilization rate

Understanding your warehouse utilization rate

Your warehouse utilization rate describes how much of the total available space you’ll be able to use safely and efficiently. Lower utilization rates—20 to 50 percent utilization—require more total space because you’re using less than half of what’s available. Higher utilization rates—up to 80 percent—require less space but could make it more difficult to access the goods.

Calculating warehouse utilization

To calculate your warehouse utilization percentage, you’ll need to know the total available space and the dimensions of your pallets.

Here’s how to do the calculation:

1. First, find the total available storage space of the warehouse. Multiply the total available square footage by its clear height (the available space between the floor and overhead objects).
2. Then, find the total volume of your inventory by multiplying the volume of each pallet rack by the number of pallets you’ll store.
3. Finally, divide your inventory volume by the total available space to calculate your warehouse utilization percentage.

Saving costs using a warehouse management system

A warehouse management system can give your company better visibility into your warehouse operations to help you optimize cost efficiency. Detailed inventory data from this technology will notify you when you need to replenish inventory so that you’ll always have sufficient stock to meet the demands of your customers, minimizing costly downtime.

Additionally, this technology can streamline inventory receiving and help staff more efficiently and accurately pick, pack, and ship inventory per order specifications. It will help you identify and eliminate your operational bottlenecks, keeping operating expenses, such as labor and materials costs, under control.

When you rent space in a warehouse, consider investing in this technology. But first choose a warehouse, like one from Agility Logistics Parks, that provides the connectivity you need to support it. This access to data and insights is another key part of building a resilient supply chain that can withstand disruptions and deliver reliable service.

Best way to find warehouse space for rent by the square meter in Saudi Arabia

The best way to rent warehouse space in Saudi Arabia is to contact a second-party logistics (2PL) partner like Agility.

Agility Logistics Parks operates over 1 million square feet of warehousing and logistics infrastructure in the three major regions of Saudi Arabia: Riyadh, Jeddah, and Dammam. It’s the largest private owner of industrial real estate in the Middle East.

Using Agility for your warehousing needs in Saudi Arabia provides your business with first-rate, modernized, secure, and sustainable warehousing infrastructure. In addition, Agility Logistics Parks can provide temperature-controlled cold-chain storage to clients that need it.

Both multinational corporations and small- and medium-sized businesses can benefit from Agility’s scalable warehousing solutions. Working with a trusted 2PL provider can give your business significant advantages when renting warehouse space in Saudi Arabia.

Rented warehouse space in Saudi Arabia and its benefits

Now that you better understand the value of square meter warehouse space in Saudi Arabia, you can make more intelligent decisions about renting the space you need in the region. Explore more benefits of using Agility’s warehousing and logistics network in Saudi Arabia for your company’s storage and distribution needs.