A new study by Mordor Intelligence which looked at the warehouse and logistics sector across the UAE, Saudi Arabia, Qatar, Oman, and Kuwait predicts growth for the industry over the next five years.
According to the industry body, the sector is “growing steadily and becoming a significant contributor to the region’s economy, despite economic challenges.” The report suggests that key reasons for this growth – which it predicts will continue until 2026 – include government and private sector investment, the continuing rise of e-commerce, lower operating costs, and increased trade amongst others.
The UAE currently takes the lead out of the GCC countries, with Kuwait-based logistics firm, Agility, listing the country as third in the world in the sector amongst 50 other emerging markets. The only two ahead of the emirates were the Asian giants of India and China. Bahrain was also in the top ten (ranking fifth), while Oman took sixth place and Saudi Arabia in the seventh position.
The report by Mordor Intelligence concluded that warehousing services in GCC countries are “dominated by local players”. Indeed, in the UAE alone government investment has seen the development of new projects, such as Dubai Logistics City and Al Maktoum International Airport, as well as the expansion to current developments, such as Jebel Ali Port and Dubai Cargo Village. “These investments [are important to ensure] sufficient capacity exists, in order to continue the United Arab Emirates’ high growth trajectory,” the report said.
THE IMPACT OF COVID-19
Like all industry sectors, warehousing and logistics were not immune from the effects of Covid-19. Indeed, the report said that “the wholesale and retail trade, transportation and storage, and financial and insurance sectors, which accounted for nearly 50% of Dubai’s GDP in 2018, have all been affected.”
These effects were felt in the disruption of global supply chains, capacity constraints, and cost pressures.
However, the report also suggested the crisis has had some positive impacts too, including companies being motivated to build “shock-resilient food and healthcare logistics” as well as more readily investing in the digitisation of the supply chain.
Indeed, another area in which the industry felt a boost was through the surge of e-commerce due to the pandemic. Mordor Intelligence said this could have a long term positive effect on the industry due to “a potentially permanent change in shopping behavior post-Covid-19, to favour online retail, [which in turn will] likely spur a demand for warehouses, fulfillment centers, and other logistics facilities.”
THE RISE OF SMART TECH IN WAREHOUSE & LOGISTICS
Another reaction to the Covid-19 pandemic is a surge in smart technology investment in the warehouse and logistics sector. “The regional logistics sector is undergoing rapid and transformational changes, bringing in smart technologies, robotics, and more to increase productivity, accuracy, and competitiveness, while reducing downtime and improving processing times and safety. The warehousing sector is undergoing major changes,” said the report.
One of the key areas where smart tech is improving warehouse management is how goods are moved, Mordor Intelligence said. “One is the physical automation in warehouses to operate at much higher speeds, volumes, and flexibility. The other are the algorithms that are optimising the movements and the decisions.”
LOOKING TO ENHANCE YOUR REAL ESTATE KNOWLEDGE?
Sign up now to the Cityscape Intelligence newsletter here