Credit By: PropertyNews.ae
In the first half of 2023, Dubai’s industrial and logistical space experienced a remarkable surge in demand, as indicated by a report from Savills. This demand escalation has been predominantly attributed to the influx of companies shifting their operations from other emirates to Dubai.
Dubai’s Industrial Market in Minutes H1 2023 report underscores a consistent growth trend that has gained momentum since 2020, showcasing a substantial appetite for logistics and industrial facilities. The driving forces behind this trend encompass the relocation of various companies from other emirates to Dubai and the adoption of the near-shoring concept.
Of particular note is the spike in demand for local manufacturing, attributed to the UAE’s ambitious industrial strategy, Operation 300bn. This initiative aims to strengthen the nation’s industrial sector, elevate its global status as an exports and re-exports hub, and generate additional employment opportunities.
Michael Fenton, Director of Industrial & Logistics at Savills, emphasized, “Prominent demand drivers for warehouse leasing activity in H1 2023 in Dubai were oil and gas-related companies, e-commerce operators, contract logistics, and indoor farm operators.”
The e-commerce sector has also contributed significantly to the demand surge. The preference for hub-and-spoke delivery channels has bolstered the construction of central “mother” warehouses near vital infrastructure and smaller “last-mile” storage facilities. This trend aligns with the growing preference for rapid delivery platforms, projecting the e-commerce sector’s continued leadership in warehouse space demand.
The active involvement of third-party logistics companies has further fueled the demand surge. Notably, Indonesian delivery giant J&T Express has significantly expanded its Dubai operations, leasing approximately 161,000 sq. ft. of space, with plans to further increase its warehousing capacity to 430,000 sq. ft. by 2026.
Oil and gas companies have also emerged as significant players in leasing warehousing and industrial space across the UAE, amplifying the demand. Furthermore, the dynamic UAE-India Comprehensive Economic Partnership Agreement (CEPA) and the country’s intentions to expand this agreement to countries such as Israel, Indonesia, Turkey, and Colombia have contributed significantly to the flourishing occupier market.
Dubai’s strategic location and the burgeoning economic ties between China and the UAE have led to an influx of Chinese companies establishing operations. This surge, supported by leasing spaces for manufacturing and exporting products to neighboring GCC and African nations, has mainly concentrated on non-bonded warehousing hubs like Al Quoz, DIP, and NIP.
The industrial and logistical real estate landscape is experiencing significant transformation, with Dubai South’s industrial zone witnessing notable occupancy growth due to its extensive land offerings for various warehouse facilities. This period has seen Amazon emerge as a prominent lessee within the free site, further fueled by the presence of multiple e-commerce firms and supporting initiatives.
Rental values have followed an upward trajectory in various submarkets, reflecting a surge in inquiry levels. Grade A properties have witnessed average rental value increases ranging from 6.7% to 14%, while Grade B stock, notably in Al Quoz, has experienced a substantial growth of 37.5%.
With nearly a million square feet of new supply underway in critical areas like JAFZA, Dubai South, DIP, and NIP, Dubai’s industrial and logistical real estate sector is evolving dynamically, shaped by the growing demand and strategic initiatives.