Demand for industrial and logistics properties in Dubai and Abu Dhabi increased 185%: Knight Frank
RIYADH: Demand for industrial and logistics property in Dubai and Abu Dhabi rose 185 percent year-on-year to 18 million square feet in the first half of 2024, according to a new report.
In its industrial market review, Knight Frank noted that the region's performance reflected the second-ranked Jebel Ali Industrial Area, where rents rose 38.5 percent to 36 dirhams ($9.80) per square foot.
The major sectors driving this increase in demand included construction at 11.7 percent, manufacturing at 11.1 percent, and logistics at 10.2 percent, which collectively accounted for a third of total demand.
The increase is in line with Dubai's Commerce and Logistics Land Transport Strategy 2030, which aims to double the sector's direct contribution to the emirate's economy to 16.8 billion dirhams.
The strategy targets a 75 percent increase in technology adoption in infrastructure, a 30 percent reduction in carbon emissions and a 10 percent improvement in operational efficiency.
Maxime Talmachi, Associate Partner and Co-Head of Industrial & Logistics, UAE, Knight Frank said: “The industrial and logistics market exhibits strong fundamentals, characterized by strong demand, minimal vacancies, and a promising pipeline of upcoming projects as developers respond to increasing levels of demand. ”
The property adviser also highlighted growing interest from institutional investors in the US, China and Europe, with the sector's global appeal boosted by attractive yields of around 8.25 per cent.
“There is a significant lack of high-quality industrial and logistics space in the UAE, particularly in Dubai. As the Dubai Industrial Strategy 2023 aims to make Dubai a global industrial hub, there is an urgent need to develop new high-quality stock,” said Mikhail Vereshchagin, Knight Frank's Associate Partner, Industrial & Logistics , the UAE said.
The London-headquartered firm projects a total of 660,000 sq ft of new supply in the UAE's commercial capital by 2024, with 360,000 sq ft in the Jebel Ali Free Zone and 300,000 sq ft in Dubai Industrial City. An additional 1.3 million square feet is expected in 2025 at the National Industries Complex, Dubai South and Dubai Investment Park 2.
“There is a clear upward trend in demand for good quality, operationally efficient logistics and storage space within the UAE and particularly in Dubai,” said David Simons, founder and CEO of UAE-based Radius Group, as quoted in the Knight Frank report.
The report focuses on the Khalifa Economic Zone Abu Dhabi Group, which accounts for 55 percent of the UAE's industrial supply, with the group seeing strong demand for storage products with an occupancy rate of 88 percent in the first quarter of 2024.
Typical warehouse rents in KEZAD's 12 economic zones range from 320 to 450 dirhams per square meter, while cold storage rents range from 350 to 550 dirhams per square meter.
“Furthermore, we are seeing a trend towards longer lease commitments, with the average lease length increasing to around 6 years in 2022 compared to around 4 years,” Kejad Group CEO Mohammed Al-Ahmad was quoted as saying in the report.
