Abu Dhabi industrial market sees strong growth in Q1 2024, amidst economic diversification efforts

The industrial market in the UAE capital sustained an upward trend during the first quarter (Q1) of 2024, driven by strategic government initiatives, investments, and a commitment to technological advancement, according to the Abu Dhabi Industrial Market Report Q1 2024 issued by Savills, a global real estate services provider.

Non-Oil Growth
The report noted that the emirate is intensifying efforts to diversify its economy away from oil dependency, aiming to establish itself as a global manufacturing hub.

It highlighted government programmes such as the Industrial Sector Strategy and ‘Make it in Emirates’ initiative, which have played pivotal roles in facilitating business expansion by providing financial support and incentives.

According to Savills, this proactive approach has contributed to a 9.1 percent growth in the non-oil economy and a 3.1 percent increase in Abu Dhabi’s real GDP in 2023 compared to the previous year, as reported by the Statistics Centre of Abu Dhabi (SCAD).

Vital Role of SMEs
The report highlighted Small and Medium-sized Enterprises (SMEs) as crucial players in Abu Dhabi’s industrial landscape, comprising about 98 percent of businesses in the emirate and employing over 46 percent of its workforce, in addition to accounting for over 42.8 percent of its non-oil GDP.

It cited figures by the Abu Dhabi Department of Economic Development (ADDED) which reported a 51.5 percent increase in the number of industrial licences issued in 2023 year-on-year and a 3.5 per cent rise in new economic licences issued in 2023.

“The total capital of newly licensed companies exceeded Dh210.7 billion ($57.3 billion), amid strong non-oil sector growth.”

At the sectoral level, Finance and Insurance, Construction, wholesale and retail, and Transportation and storage have made significant contributions to the non-oil GDP in 2023.

The hotel and tourism industry in the emirate is also experiencing rapid growth, boosted by the inauguration of a new airport terminal in November 2023.

This expansion is expected to enhance capacity, thereby stimulating increased international visitors and trade activities, according to the report.

Escalating Demand
Savills pointed out that the growth in Abu Dhabi’s non-oil sector is fueling demand for industrial and logistics/warehousing space in Abu Dhabi, “propelled by robust intraregional trade, excellent infrastructure, and a burgeoning digital economy.”

The report noted that Small and Medium-sized Enterprises (SMEs) are increasingly opting for Light Industrial Units (LIUs) due to their affordability and scalability, aligning with the overall growth trajectory of the sector.

“Abu Dhabi’s appeal lies in its flexible and attractive land rents, along with incentives for amenities like electricity, water, and gas. Additionally, its proximity to Dubai and the surge in regional demand contribute to its allure. As the government actively positions the country as a pivotal hub for exports and re-exports, warehousing occupancy levels have risen significantly across the city,” it stated.

Primary Drivers
In terms of sector-specific growth, the report identified manufacturing, oil and gas, and third-party logistics (3PL) as primary drivers of demand. The manufacturing sector alone contributed over 12% to the non-oil GDP and 9% to the overall GDP in 2023, underscoring its pivotal role in economic diversification efforts.

“The added value from manufacturing activities reached AED 101 billion, making it the largest non-oil contributor to the GDP compared to the previous year,” the report stated.

It also revealed that the e-commerce industry is experiencing rapid growth fueled by increased local consumption, with quick delivery services popularizing smaller units situated nearer urban areas, while e-commerce companies embrace a “hub-and-spoke” model to improve delivery times and enhance customer experience.

Leasing Activity, Infrastructural Expansion
Geographically, the report showed that leasing activity during Q1 2024 was concentrated in key industrial zones such as ICAD, Mussafah, and KEZAD.

Due to its strategic position between Abu Dhabi and Dubai, its proximity to Khalifa Port and attractive incentives offered by the Industrial Development Bureau, KEZAD has emerged as a favored location for industrial operations, it noted.

The report also highlighted significant infrastructural developments, with construction underway for nearly a million square feet of new industrial and logistics space across Musaffah, ICAD, and Al Markaz, slated for completion in 2024.

It revealed that KEZAD Group is committing Dh621 million to develop over 250,000 square metres of warehousing capacity, expected to be operational by late 2025.

In parallel, Aldar is enlarging its current logistics facility, ADBH, by an additional 33,000 square meters, with full tenancy secured by Etihad, Mubadala, and Twofour54.