Dubai’s industrial realty has got what it takes

Dubai: Dubai’s residential space might be seeing fewer transactions these days, and there are way too many office properties coming to the market. But for those high networth investors seeking sustained growth from their exposures, Dubai’s industrial realty is offering them a lot of alternatives.

Industrial property in Dubai continues to record a steady upturn in values and rentals, and the current demand is such that just about any new stock coming into the market has no problem getting snapped up.

All of the free zones in the emirate are feeling the lift from the surge, including the offices within. In recent months, such office spaces have been leased by blue-chip names as Bentley Motors, following its decision to upgrade its presence in Dubai into a fully-fledged headquarters with a broad geographic coverage.

“Global automobile majors continue to show interest in creating regional hubs within free zones”, states a new report issued by Knight Frank which tracks trends in Dubai’s industrial realty. That apart, there is also a demand pull from what can be termed as the traditional client base for Dubai’s logistics and warehousing real estate. That includes the food and beverage companies and retailers, while “third-party logistics and light industrial requirements have also seen a steady increase in demand”, the report adds.

For institutional investors, “The appeal is low leasing risk, a result of long term leases to tenants often with measurable and solid credit ratings,” said Jesse Downs, Managing Director of Phidar Advisory. “So the income is considered secure.

“Investors are looking for newer, well-designed properties around transportation and logistics nodes leased to well-rated tenants on a minimum 10- to 15-year lease terms.”

Exponential gains

Also, as has been the case in any market where e-commerce has taken hold quite strongly, “The coming two to three years will see a significant build up in Dubai and the UAE’s logistics capacities to service the exponential gains projected for selling online,” said Nadeem Khanzadah, Deputy General Manager for Retail at Jumbo Electronics. “Apart from same-day deliveries within the UAE, logistics providers will also have to start seriously thinking about fast-track deliveries in neighbouring markets from here.”

According to Arun George, Senior Surveyor for Commercial at Knight Frank, “Dubai’s has been enhanced by the bonded transport and logistics corridor from Jebel Ali Free Zone Authority (Jafza) to DWC (Dubai World Central).

“General market sentiment has been upbeat … albeit there was certain amount of restraint in [the] last quarter of the year from occupiers. On the whole, there was healthy appetite for industrial accommodation in prime industrial districts and free zones.”

The belief, among some industry sources and investors, is that the upturn in Dubai’s industrial realty should continue. That stems from the near certainty that this year will see the steady launch of projects that would add up to the Expo 2020 bouquet of offerings. Construction sector and its many ancillary support industries should play a prime role in pushing up demand for commercial space.

The UAE’s “GDP growth is expected to increase in 2015 and 2016 at 3 per cent and 4 per cent respectively”, according to a report from DTZ, the consultancy. “The 2015 and 2016 forecasts are reinforced by the expected boost to the non-oil sector driven by increased investment and construction activity relating to Expo 2020, a general increase in activity in the real estate sector and improving credit growth”.

Investors should be taking note. If they want to be in a space where action is, industrial could well be it.

Source: Manoj Nair, Associate Editor,


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