Dubai Industrial Market Resilient and Stable

In comparison to other countries in the Middle East and North Africa MENA region, the industrial market of Dubai is regarded as resilient and stable, because it is dominated mainly by light industries and logistics.

Jones Lang LaSalle estimates the industrial stock in Dubai to stand at approximately 66 million sq m of built space, representing around 20% of the total industrial land, with JAFZA North believed to have the largest stock in Dubai.

Rental rates in completed industrial units in Dubai currently vary significantly from one area to another, with no real standardization of logistics facilities.

The average rent across onshore areas is around AED 350 per sq m. The older areas command average rents of 300-550 per sq m, due to their proximity to local markets, despite the poor quality of their stock and the relatively underdeveloped infrastructure systems. Completed units in newer but more peripheral locations (such as DIC and DIP) offer somewhat lower average rents.

The free zone areas of Jebel Ali and Dubai Airport command a higher average of between AED 350 – 800 per sq m for completed warehousing units

Currently quality does not seem to be driving price. Price remains determined by critical mass, clustering and location as companies prefer being positioned close to the CBD.

Demand is starting to shift towards those areas offering better quality products, well developed infrastructure and access to ports and/or airports (e.g. DIC, DIP, JAFZA). Al Maktoum International Airport will start transforming into an integrated logistics platform over time, increasing the attraction of industrial areas to the south of Dubai.

The industrial market has been much less cyclical than other sectors over recent years and continues to be dominated by long term commitments to single tenants.

Dubai Industrial City (DIC) is the largest industrial project to-date and is spread across 52 million sq m (560 million sq ft) of land.

There have been large amounts of land earmarked for industrial uses in the new industrial areas allowing for expansion into the foreseeable future. The old areas such Ras Al Khor or Al Qusais do not have large plots of land, and land availability is scarce.

JAFZA North is considered to have the largest amount of industrial stock, estimated at 21,375,000 sq m of GFA, as it is home to major international companies.

The industrial sector in Dubai benefits from being less exposed to oversupply than other segments and is therefore projected to be one of the best performing sectors in the short-to-medium term.

Industrial demand

The increase in demand for industrial space in Dubai is supported by the growth of key sectors such as infrastructure, transportation and aviation.

Investments in infrastructure targeted mainly the Jebel Ali Free Zone, the Al-Maktoum International Airport and the expansion of Dubai Airport.

Dubai is now home to the 8th largest cargo airport in the world in Dubai International Airport and Jebel Ali is the biggest port in the Middle East.

Most of the current enquiries involve the expansion or consolidation of companies already located in Dubai. However, as global economic conditions improve this trend is expected to change with increased interest from new entrants.

Occupier demand falls into two categories: smaller tenants prefer to rent or buy existing facilities, while large global corporates prefer to acquire land plots on which to develop their own facilities, as they cannot find high quality speculatively built premises.

As the volume of freight through both Jebel Ali port and the new Al MaktoumInternational Airport at Dubai World Centre continues to increase, there is likely to be continued demand for warehousing and logistics space in the major industrial locations to the south of Dubai.