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Jeddah - Yasmine El Tohamy - Demand for industrial and logistics assets in Dubai and Abu Dhabi surges 185%: Knight Frank
RIYADH: Industrial and logistics asset demand in Dubai and Abu Dhabi surged 185 percent year-on-year to 18 million sq. feet in the first half of 2024, a new report showed.
In its industrial market review, Knight Frank noted that the sector’s performance is reflected in the Jebel Ali Industrial Area Second Category, where rents surged 38.5 percent to 36 dirhams ($9.80) per sq. foot.
Key sectors driving this surge in demand include manufacturing at 11.7 percent, construction at 11.1 percent, and logistics at 10.2 percent, which collectively account for one-third of total demand.
This growth 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 16.8 billion dirhams.
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.
Maxim Talmatchi, associate partner and co-head of Industrial & Logistics, UAE, at Knight Frank, said: “The industrial and logistics market demonstrates robust fundamentals, characterized by strong demand, minimal vacancies, and a promising pipeline of upcoming projects as developers respond to the rising level of demand.”
The property consultant 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.
“There’s a noticeable shortage 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 stock,” said Mikhail Vereshchagin, Knight Frank’s associate partner, Industrial & Logistics, UAE.
The London-headquartered firm projected new supply in the UAE’s commercial capital to total 660,000 sq. feet in 2024, with 360,000 sq. feet in the Jebel Ali Free Zone and 300,000 sq. feet in Dubai Industrial City. An additional 1.3 million sq. feet is expected in 2025 across the National Industries Complex, Dubai South, and Dubai Investments Park 2.
“There is a clear growth trend in demand for better quality, operationally efficient logistics and warehousing space within UAE, and specifically in Dubai,” said David Simons, founder and CEO of UAE-based Radius Group, as quoted in the Knight Frank report.
The report focused on the Khalifa Economic Zones Abu Dhabi group, which accounts for 55 percent of the UAE’s industrial supply, stating that the group saw strong demand for storage products with occupancy rates reaching 88 percent in the first quarter of 2024.
General warehouse rents in KEZAD’s 12 economic zones range from 320 to 450 dirhams per sq. meters., while cold storage rents range from 350 to 550 dirhams per square meter.
“Additionally, we are witnessing a trend toward 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.
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