Demand for industrial and logistics assets in Dubai and Abu Dhabi up 185%: Knight Frank
RIYADH: Demand for industrial and logistics assets in Dubai and Abu Dhabi rose 185 percent year-on-year to 18 million square feet in the first half of 2024, a new report showed.
In its review of the industrial market, Knight Frank noted that the sector's performance was reflected in the category two industrial area of Jebel Ali, where rents rose 38.5 percent to 36 dirhams ($9.80) per square foot.
Key sectors driving this increase in demand include manufacturing at 11.7 percent, construction at 11.1 percent and logistics at 10.2 percent, which together account for one-third of total demand.
This growth is in line with Dubai's Land Transport Trade and Logistics Strategy 2030, which aims to double the sector's direct contribution to the emirate's economy to 16.8 billion dirhams.
The strategy also aims for a 75 percent increase in infrastructure technology adoption, a 30 percent reduction in carbon emissions and a 10 percent improvement in operational efficiency.
Maxim Talmatchi, associate partner and co-head of Industrial & Logistics, UAE, at Knight Frank, said: “The industrial and logistics market is showing robust fundamentals, characterized by strong demand, low vacancies and a promising pipeline of upcoming projects as developers respond . to the rising level of demand.”
The property adviser also highlighted growing interest from institutional investors in the US, China and Europe, with attractive yields of around 8.25 per cent boosting the sector's global appeal.
“There is a noticeable lack of high-quality industrial and logistics space in the UAE, especially 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 stocks,” said Mikhail Vereshchagin, Knight Frank Associate Partner, Industrial & Logistics, UAE.
The London-based firm has forecast new deliveries in the commercial capital of the UAE to total 660,000 sq ft in 2024, with 360,000 sq ft in the Jebel Ali Free Zone and 300,000 sq ft in the industrial city of Dubai. Another 1.3 million square feet is expected in 2025 at the National Industries Complex, Dubai South and Dubai Investments Park 2.
“There is a clear upward trend in the demand for higher quality, operationally efficient logistics and warehouse space in the UAE and specifically Dubai,” said David Simons, founder and CEO of UAE-based Radius Group, as quoted in the Knight Frank report.
The report focused on Abu Dhabi's Khalifa Economic Zones group, which accounts for 55 percent of the UAE's industrial supply, and said the group saw strong demand for storage products, with occupancy rates reaching 88 percent in the first quarter of 2024.
Rents for general warehouses in KEZAD's 12 economic zones range from 320 to 450 dirhams per square meter, while rents for cold storage facilities range from 350 to 550 dirhams per square meter.
“In addition, we are seeing a trend towards longer lease commitments, with the average lease length increasing to almost 6 years from around 4 years in 2022,” said Mohamed Al-Ahmed, CEO of KEZAD Group, as quoted in the report.
