Industrial and logistics asset demand in Dubai and Abu Dhabi surged 185 percent year-on-year to 18 million square feet in the first half of 2024, according to a new report.
Rising rents in Jebel Ali Industrial Area
Knight Frank’s industrial market review noted that the sector’s performance is reflected in the Jebel Ali Industrial Area Second Category, where rents jumped 38.5 percent to AED36 ($9.80) per square foot.
Key sectors driving demand
Additionally, the key sectors driving this surge in demand include manufacturing (11.7 percent), construction (11.1 percent), and logistics (10.2 percent), collectively accounting for one-third of total demand. This aligns with Dubai’s Commercial and Logistics Land Transport Strategy 2030, which aims to double the sector’s direct contribution to the emirate’s economy to AED16.8 billion.
Key targets
The strategy also targets a 75 percent increase in technology adoption within infrastructure, a 30 percent reduction in carbon emissions, and a 10 percent improvement in operational efficiency.
Robust market fundamentals
Maxim Talmatchi, associate partner and co-head of Industrial & Logistics at Knight Frank UAE, said the market demonstrates robust fundamentals, with strong demand, minimal vacancies, and a promising pipeline of upcoming projects.
Global investor interest
The report also highlighted increasing interest from institutional investors in the US, China, and Europe, with the sector’s global appeal bolstered by attractive yields of around 8.25 percent.
Shortage of high-quality space
Mikhail Vereshchagin, Knight Frank’s associate partner for Industrial & Logistics in the UAE, noted a shortage of high-quality industrial and logistics space, especially in Dubai, and an urgent need to develop new high-quality stock to support the Dubai Industrial Strategy 2023.
Projected new supply in Dubai
The report further projected new supply in Dubai to total 660,000 square feet in 2024, with 360,000 square feet in the Jebel Ali Free Zone and 300,000 square feet in Dubai Industrial City. An additional 1.3 million square feet is expected in 2025 across the National Industries Complex, Dubai South, and Dubai Investments Park 2.
Growing demand for quality space
David Simons, founder and CEO of Radius Group, stated that there is a clear growth trend in demand for better quality, operationally efficient logistics and warehousing space within the UAE, particularly in Dubai.
Strong demand in KEZAD
The report also focused on the Khalifa Economic Zones Abu Dhabi (KEZAD) group, which accounts for 55 percent of the UAE’s industrial supply. KEZAD saw strong demand for storage products, with occupancy rates reaching 88 percent in the first quarter of 2024.
Warehouse rents in KEZAD
General warehouse rents in KEZAD’s 12 economic zones range from AED320 to AED450 per square meter, while cold storage rents range from AED350 to AED550 per square meter.
Longer lease commitments
Moreover, Mohamed Al-Ahmed, CEO of KEZAD Group, noted a trend toward longer lease commitments, with the average lease length increasing to almost 6 years from around 4 years in 2022.
For more news on industry, click here.
