Cityscape Intelligence is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Demand increases for Dubai’s warehousing & industrial sector

Dubai Prt Harbour
Ever since the pandemic sent shoppers online, the industrial and warehouse sector in Dubai has seen tremendous growth — but will this trend continue?

Up until last year, Dubai’s warehousing sector was the exclusive playground of a handful of developers. The sector was doing well, yes, but most operators in the space were in the market for purpose-built, specialised facilities. Why would an Amazon or a Noon settle for anything but custom-built? And so investors — both private and institutional — opted to invest in residential, office or retail real estate spaces instead: easier to understand, ample opportunity.

And meanwhile the developers in the warehousing sector reaped high returns. You could rake in anywhere between an eight to ten per cent annual yield. Demand was continuous, risk minimal, and you could pull AED 25 per square-foot in a secondary industrial area, upwards of AED 50 per square-foot in a principal area, and in a sought-after location like Dubai South, upwards of AED 60 per square-foot.

But that was then. Here, too, the pandemic catalysed a shift. Lockdowns, curfews, and suddenly everyone, everywhere, was buying everything online. Soon necessity transferred to habit. But online shopping is a competitive space — same-day, next-day, express deliveries are the norm. And this set everyone, from small businesses to international conglomerates, to F-and-B players, scrambling for storage units, fulfilment centres. Suddenly everyone was in the market for a warehouse or two.

SPIKE IN ONLINE SHOPPING

Online shopping is big business in the UAE: one study found an online shopper in the UAE will spend an average of USD 122 per transaction, compared to an average of USD 76 spent per transaction in mature markets, and USD 22 per transaction in emerging ones. The nation’s consumers also have the highest annual spend per online shopper at USD 1,648.

The revenue from the UAE’s e-commerce sector is expected to come in at well over USD 7 billion in 2021, and over USD 11 billion by 2025. And every USD 1 billion of e-commerce sales requires over 100,000 square-feet of logistics real estate. An increasing number of businesses in the UAE are now on the lookout for local delivery hubs closer to major residential and business districts.

Customer in mall selecting from mobile

DEMAND FOR INDUSTRIAL-GRADE LOGISTICS AND WAREHOUSE

If you’re buying warehouse space, the UAE is the way to go. London, Stockholm and Tokyo are the most expensive locations in the world for warehouse properties, while India and Vietnam are the most affordable. Warehousing property and electricity costs are higher in the UAE than in India and Vietnam, but these are offset by its low diesel costs. That’s what earns the UAE its position as one of the least expensive locations for warehousing operations globally.

Demand for new industrial-grade logistics and warehouse real estate per year now sits at near eight million to ten million square-feet, and approximately half of that supply comes from Dubai alone — owing to its well-established air cargo routes and excellent maritime freight connectivity, the emirate is seen as the region’s logistics hub.

CONTINUING GROWTH IN THE INDUSTRIAL AND LOGISTICS SECTOR

Demand and occupancy levels across Dubai’s warehousing sector remained stable in 2020. Demand was particularly strong across the city’s key free zone micro-markets. Space uptake was led by e-commerce, e-pharma and e-grocery businesses, followed by the third-party logistics sector. Transaction activity was driven by existing tenants looking for additional space to increase their inventory capacity and by companies moving their sales online.

Moving forward, demand across Dubai’s warehousing market is expected to continue to grow right until 2025. Demand is expected to remain particularly high across cold storage and temperature-controlled spaces with pharmaceutical companies for tenants.

 

WANT MORE REAL ESTATE INSIGHT? 
Subscribe to the Cityscape newsletter here

 

Hide comments
account-default-image

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish