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Much has been anticipated in terms of activity and price progress in Dubai's residential real estate sector after the emirate's successful and much-deserved Expo 2020 hosting bid win.
True to say, there is a spike that was expected in the residential segment. But the ''dark horse'' in this whole positive mood is the emergence of demand in the industrial real estate sector.
Since the Expo requires a heavy industrial traffic with the various suppliers and vendors taking their position in Dubai in the next coming years, it is expected that there will be an increasing demand within this sector.
Utilizing the trump card as the most strategic city by location and infrastructure in this region, there has always been heavy potential in Dubai's trading and logistics segments.
The low activity years after the financial crisis in 2008 enabled the completion of several infrastructure projects in the premier industrial parks of Dubai such as the Dubai World Central (DWC), Dubai Industrial City (DI) and Dubai Investments Park (DIP), which are all on the corridor of the proposed Expo 2020 venue.
The Jebel Ali Free Zone has always enjoyed the status of being the more established premier industrial district in the city.
With many small and medium enterprises trying to gear up for the Expo 2020, both DIP and DI will turn out to be more affordable for them.
The leasing rates of plots in DI are at an average of Dh34 per square meter. In DIP, plot rates are at Dh55 per square meter for logistics and Dh38 per square meter for industrial. Each of the districts has a profile of its own.
The next coming months will witness many industries realizing that it is better to develop their own premises in these industrial parks than pay the high rentals on available units as the supply decreases.
Today, development construction costs stand anywhere between Dh175 and Dh275 per square foot for industrial properties.
The current lease rates are anywhere between Dh35 and Dh50 per square foot per annum for properties such as warehouses and factories, which are looking to increase when business activities shoot up in anticipation of the Expo 2020 traffic.
With a four to six-year window to recover the cost of development as opposed to increasing leasing rates, smart industries are looking to set up their own facilities rather than pay rent.
The increasing support of financial institutions to extend mortgage or fund the construction or development of industrial properties is another key encouraging factor.
Another strong sign in the industrial real estate sector is the emergence of the manufacturing sector.
The city is already a good base for industries, such as food and beverage and steel manufacturing, to expand their markets to the GCC and CIS countries.
The recent introduction of a zone dedicated to halal food at DI is a prime indicator in this regard. Dubai is forecast to be the most active and reliable base for this sector in the coming years.
A section of industries from neighboring countries, such as India and Pakistan, is also being tapped. Some industries in these countries are looking for an additional base in Dubai to operate in the region.
The cost of their operation, when compared to the local market, may be higher. But the peace and efficiency of operating a business without any socio-economic conflicts and infrastructure issues, such as power or labor problems, is one of the advantages of setting up business in the emirate.
Dubai is not far from becoming a buoyant industrial paradise.
Have a look at the commercial property life cycle of Dubai
Source: Parvees A. Gafur, Special to Freehold
The writer is CEO - Propsquare Real Estate