The realty sector linked to the UAE’s industrial and logistics business exhibited strong growth in the first half of this year, with both KEZAD Group (Khalifa Economic Zones Abu Dhabi) and Dubai industrial zones reporting good business in terms of occupancy and rentals.
According to the data released by Knight Frank, a global consultancy, rents in Dubai’s industrial and logistics sector have shown continued strong growth in H1 2024. The highest rental growth was registered in Jebel Ali Industrial, with average Grade B rates surging 38.5 percent over the past 12 months.
Since Q2 2021, average lease rates in Al Quoz have doubled, with Grade A rents increasing from Dh33 per square feet to Dh65 per sq.ft. In some instances, rents have climbed to Dh100 per sq.ft.
Knight Frank’s H1 report says KEZAD Group, which represents 55 percent of the UAE’s industrial supply, has seen robust demand for warehousing products. In Q1, occupancy rates reached 88 percent. It also witnessed a trend towards longer lease commitments, with the average lease length increasing to almost six years from around four years in 2022.
General warehouse rents across the 12 economic zones in KEZAD ranged from Dh320 to Dh450 per sq.m. while cold store rents ranged from Dh350 to Dh550 per sq.m.
KEZAD’s new expansion will provide more than 250,000sq.m. of new warehouse facilities by the end of 2025. The expansion will increase KEZAD’s total capacity by 43 percent.
Knight Frank recorded almost 18 million sq.ft. of new requirements for industrial and logistics assets in the first half, representing a 185 percent increase over the same period last year. The top sectors contributing to the demand are manufacturing (11.7 percent), construction (11.1 percent), and logistics (10.2 percent), which collectively account for a third of total demand.
“The industrial and logistics market demonstrates robust fundamentals, characterised by strong demand, minimal vacancies, and a promising pipeline of upcoming projects,” says Maxim Talmatchi, Associate Partner- Co-Head of Industrial & Logistics at Knight Franks.
Knight Frank estimates that Dubai will see 660,000sq.ft. of new supply in 2024, spread across JAFZA (360,000sq.ft.) and Dubai Industrial City (300,000sq.ft.). An additional 1.3 million sq.ft. is expected in 2025 in National Industries Park, Dubai South and Dubai Investment Park 2.
Dubai South and Aldar Properties will create a Grade A logistics facility in Dubai South’s Logistics District. The facility will cover 22,915sq.m and will be completed by Q2 2025.
“There is a severe shortage of new warehouses in Dubai, which is resulting in demand spilling over to other Emirates such as Abu Dhabi,” says Aliaa El Esaaki – Research Manager of Knight Frank.
“In fact, we are tracking just 660,000sq.ft. of new supply that is due to be delivered this year. The gulf between demand and supply is clearly highlighted when you consider that the total level of new requirements during H1 alone stood at 18 million sq.ft,” she explained.
There has also been growing interest from institutional investors from the USA, China, and Europe. The Knight Frank report says the sector remains very attractive on the global stage for investors, with yields standing at around 8.25 percent.
“The shortage of supply, coupled with sustained demand has continued to drive upward pressure on rents and capital values,” says Adam Wynne, Partner – Head of Commercial Agency, at Knight Frank.
As the UAE remains attractive due to its pro-business environment and desirability as a place to live, Wynne says that rental and value increases will continue, even as developers race to introduce new supply to fill the gap.
Dubai has launched the Commercial and Logistics Land Transport Strategy 2030. The strategy launched by the Roads and Transport Authority will increase the sector’s contribution to Dubai’s economy to Dh16.8 billion, from Dh8.5 billion today.
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