A major shift is on the horizon for the Saudi urban landscape, after the Ministry of Industry and Mineral Resources announced that 46 low-environmental impact industrial activities will be allowed within cities and on commercial streets. The decision, which was based on the findings of a central committee that included eight government agencies, puts the real estate market at a critical stage of readjustment to new variables in land use and urban activities.
The activities allowed within commercial streets were categorized after a comprehensive study of 1,143 industrial activities, which were categorized by environmental impact into three main categories: Highly skilled, skilled, and basic, with a focus on activities with low environmental impact. According to the ministry, the first phase of implementation begins on July 6, 2025 with the reclassification of workers and existing facilities within cities, followed by the second phase on August 3, 2025, which includes new industrial facilities that will be built within the urban area.
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Shift in land and building values
<The decision constitutes a paradigm shift in the industry's relationship with the city, and at the same time poses a number of challenges and opportunities for the real estate sector. On the one hand, this shift is expected to increase demand for mixed-use properties that can accommodate light industrial units such as small workshops, food labs, and digital production centers, as well as commercial or residential use. On the other hand, the unplanned expansion of these activities may cause urban and environmental pressures that may negatively affect the attractiveness of some neighborhoods.
<According to market observers, commercial areas within major cities such as Riyadh, Jeddah and Dammam may witness a gradual shift in usage patterns, especially in vital streets that could attract light industrial activities that require proximity to the end consumer. Land and building prices that are adaptable to this new pattern of use are expected to rise, while some residential properties adjacent to these activities may see a relative decrease in value if strict controls are not imposed to ensure the quality of life for residents.
Strict controls and environmental monitoring
The Ministry has obliged each industrial facility to submit an environmental impact study at its own expense, while the competent authorities confirmed that the continuation of industrial activity in any location within cities will be subject to a comprehensive review that includes safety, health impact, and surrounding land uses, with the possibility of correcting the status of some violating facilities, relocating or closing them if they conflict with the urban trends of the region.Specialists point out that the environmental aspect was a major focus of the central committee's work, as the Ministry obliged each industrial facility to submit an environmental impact study at its own expense. <Specialists point out that international experiences in this field, such as the “urban workshops” model in Berlin, or light industry zones in Singapore, have proven that integrating light industry into the urban fabric can stimulate real estate growth and revitalize the local economy, provided there is smart urban planning and functional separation between uses to ensure that the quality of life is not harmed. Cities such as Dubai have seen a similar development, with areas such as Al Quoz and Al Ras transformed from closed industrial complexes to mixed-use spaces with art studios, retail markets and creative production workshops.
New real estate opportunities
<In Saudi Arabia, experts say the decision will generate a new wave of real estate opportunities, including the development of hybrid projects combining light manufacturing, retail, residential or office space, requiring developers to adopt more flexible design models and possibly rehabilitate older buildings to suit the needs of these activities. The value of small warehouses and warehouses within cities is also expected to grow, especially as the e-commerce and logistics aggregation sectors grow. <Despite the economic and developmental potential of this shift, there are fears that these activities may expand at the expense of urban planning, or that industrial activities with medium or high environmental impact may leak out if oversight is weak. Therefore, the success of this experiment depends on the ability of regulators to implement strict requirements, find smart urban solutions that separate industrial and residential areas, and provide incentives to apply green building and sustainable energy concepts, thus enhancing the attractiveness of industrial investment within cities without affecting the lifestyle in them.
Changing demand patterns
Experts in the real estate sector stress that exploiting the decision requires investors and developers to move quickly to explore areas capable of real estate transformation and take advantage of the change in demand patterns, especially with the possibility of creating new spaces for industrial real estate investment, which was previously confined to the periphery or closed industrial areas.
Observers in the real estate sector are of the opinion that the decision requires investors and developers to move quickly to explore areas capable of real estate transformation and take advantage of the change in demand patterns. Observers believe that the Kingdom is preparing for a new phase of integration between economic and urban activities, in which real estate is a direct partner in industrial development, and the city is a production platform as much as a living space, a step that enhances the flexibility of the economy and moves the real estate market from traditional monotony to a multidimensional and multifunctional dynamic.
Observers believe that the Kingdom is preparing for a new phase of integration between economic and urban activities, in which real estate is a direct partner in industrial development.
