Kuwait, 20 August 2023: In a recent study on Kuwait’s West Abu Fatira Al-Herafia and Ardiya Al-Herafia areas, Kuwait International Bank (KIB) reported that demand for light industrial properties witnessed a sharp rise over the past five years. The increase comes in conjunction with the support the Kuwaiti state has been providing to owners of small and medium enterprises to launch their various projects, as they play a vital role in diversifying different sectors of the local economy.

Discussing the report, Mubarak Al Harbi, Team Leader of the Real Estate Appraisal Engineers at KIB’s Real Estate Department, said that both West Abu Fatira Al-Herafia (Aswaq Al Qurain) in Mubarak Al-Kabeer Governorate and Ardiya Al-Herafia in Al Farwaniyah Governorate are distinguished areas. He explained that the two are service areas for light industries with official ownership documents since their establishment in 2006, unlike other industrial zones that fall under the usufruct system.
Al Harbi pointed out that the percentage of building types at Ardiya Al-Herafia is distributed as follows: 100% basement, 80% ground floor, and 20% mezzanine. As for the Abu Fatira Al-Herafia area, the percentages are 80%, broken down as follows: 80% basement, 80% ground floor, and 80% first floor, according to the building code of Kuwait Municipality.

Al Harbi also elaborated that the prices in these two areas witnessed an upward trajectory from their establishment until the end of May 2023. The reasons behind this price increase are multiple, on top of which is an increase in the types of commercial activities allowed, as opposed to previously being limited to specific light industrial activities. The higher prices also stem from the higher demand from investors for building units in these two areas. Additionally, the increased activities in both areas are able to compete with the commercial and industrial sectors, serve nearby residential areas, and are close to some governmental departments, especially vehicle-related departments. Moreover, the buildings in these two areas are not affected by the higher state fees on the industrial sector (usufruct right). They have also been approved as collateral for banks compared to state-leased properties (usufruct right) and are preferential for trading by investors over usufruct real estate.
The above reasons combined, Al Harbi explained, had a great impact on the increase in rental rates for units of this real estate segment, and an unprecedented surge in demand for them. This positively affected the value of real estate and trading in them, especially after the end of the Covid-19 pandemic.

Trade in the Light Industrial Sector
The average trade price, Al Harbi reported, in the light industrial sector for the year 2020 amounted to KD 1,042,000, the lowest in the past five years, due to the negative effects of the Covid-19 pandemic on the real estate market. However, the average trade price in May 2023 was KD 1,545,000, the highest in value since 2019.
Al Harbi added that the trades’ average price curve in the light industrial sector has been on an upward path since 2021, with the pandemic crisis easing, life returning to normal and health precautions canceled. The average price for trades in the light industrial sector in 2021 increased by 16.76% to KD 1,216,650, compared to 2020 when the average trade price was worth KD 1,042,000. Meanwhile, the average trade price increased by around 11.61% in 2022 to KD 1,358,000, compared to 2021, and by around 13.77% during the first 5 months of this year, where the average trade price for light industrial properties stood at around KD 1,545,000 compared to 2022. As such, the average value of trades jumped by 48.27% between 2020 and the first five months of 2023.

Land Price and Return Rate in Ardiya Al-Herafia
The study showed an upward trajectory in the Ardiya Al-Herafia land price curve between 2019 and May 2023, Al Harbi said. The price of a 250 square meters (sq m) land located on a side street was about KD 588,000, while it reached KD 700,000 in May 2023, an increase of about 19%. He indicated that the price of land of the same size on a main street reached KD 750,000 in 2019, while it amounted to about KD 850,000 in 2023, an increase of 13.33%. Moreover, Al Harbi indicated that the rate of return on these light industrial plots during the same period declined, as it reached 7.5% for a 250 sq m piece of land on a side street in May 2023, and 7.25% for one located on a main street.

Land Price and Return Rate in West Abu Fatira Al-Herafia
The study similarly illustrated an upward trajectory in West Abu Fatira Al-Herafia between 2019 and May 2023, Al Harbi stated. The price of 500 sq m of land on a side street was about KD 750,000, while it reached KD 950,000 by May 2023, which equates to a 26.66% increase. He indicated that the price of land of the same size in the same area on the corner of two streets increased from KD 825,000 in 2019 to KD 1,125,000, a 36.36% increase. 
Al Harbi concluded his remarks by highlighting that the return rate for these lands during the stated period declined. Returns reached 7.5% for 500 sq m sized land on a side street in May 2023, and 7.25% for the same sized land on a main street.