Why logistics parks are growing more popular in the MENA region and beyond

Enterprise explains: Logistics parks. Logistics parks have been popping up across the MENA region in recent years, whether in the UAE, Saudi Arabia or Egypt, as countries ramp up efforts to diversify their economies and become logistics hubs. But while logistics parks are becoming increasingly common, their functions have changed over the years — from being a place for companies to centralize their logistics operations to offering value-added services to enhance supply chains.

In a nutshell: Logistics parks are industrial areas where companies store, manage, and distribute their goods from a single location, according to a blog post by Kuwaiti logistics firm Agility. The parks are usually made up of a collection of warehouses, office complexes, data centers, transport depots, fuel pumps, piers or bays, labor accommodations, and retail facilities. The underlying aim behind logistics parks is to streamline businesses’ logistics operations by establishing a central hub for transportation and warehousing, thereby reducing costs and saving time.

What kinds of companies use logistics parks? Manufacturers, assemblers, importers and exporters, or companies that handle packaging of goods on-site, are all examples of businesses that use logistic parks for their operations.

Location, location, location: Location plays a vital role for companies choosing a logistics park. Most parks are strategically situated in industrial belts close to airports, ports with access to freeways, or near railways to provide easy access to transportation modes that cater to a company’s requirements. This kind of access can significantly improve distribution speed and reduce shipping costs for firms. However, not all logistics parks offer access to multiple transportation modes, with some focusing on offering access to just one mode that best suits their customers’ needs.

Logistics parks come with plenty of perks: Parks usually provide additional services such as waste collection, landscaping and office working spaces amenities such as electricity, high-speed internet, water, and catering facilities, according to Marine Insight.

They are not just for big players: Smaller facilities within logistics parks are ideal for smaller e-commerce fulfillment or processing-and-assembly operations. These facilities provide small businesses assistance with freight distribution, and usually provide affordable leasing prices.

But large players that want to expand will also benefit from being in a park: Larger local businesses looking to grow their market share and enter new markets to better compete with multinationals can expand their space as the company grows with the help of storage space at logistics parks, and will benefit from having greater access to transportation networks and well-managed distribution. Multinational corporations tend to take up the larger facilities within parks.

But they require hefty funds: Logistics parks are typically large-scale projects that require significant investment, and many countries face infrastructure and funding constraints, according to CNBC TV18. Funding is a major challenge for logistics parks, particularly in emerging markets.

The largest logistics park in the region? The upcoming USD 346 mn, 225k sqm logistics zone in Jeddah Islamic Port. Maersk and the Saudi Ports (Authority Mawani) began construction on Saudi Arabia’s largest Integrated Logistics Park at Jeddah Islamic Port earlier this year. Saudi Arabia already has the King Abdullah Port Logistics Park, spanning an area of 350k sqm and situated near the port of Jeddah on the Red Sea coast, according to its website. It provides a wide range of logistics services, including warehousing and cold storage facilities and an empty container depot and repair facility.

The UAE is also big on logistics parks: Dubai South’s multimodal logistics hub Logistics District spans 18 sqkm and enables cargo to be transported from the port to the airport in 20 minutes. It also provides direct access to the UAE’s main trans-emirates highways. The park includes warehouse facilities and offers flexible storage systems as well as an on-site visa and licensing authority.

Egypt is another up-and-coming player: Egyptian local developerHassan Allam Utilities recently partnered up with Agility to establish two logistics parks in Egypt. The first park, Yanmu East Logistics Park, is set to open in August 2023 and will cost some USD 100 mn to build and the second park, Yanmu West Park, will launch in 2024 at a yet-to-be-finalized location.