Savills has released its Dubai Industrial Market report for the first half of 2019. The new research suggests that a supply/demand mismatch has created a challenging time for the Dubai industrial and warehousing micro-markets, with Grade A property rents dropping between 4% - 6% across the city, and Grade B rental values falling 8% - 10%, based on a half-yearly comparison.
However, initiatives such as the Dubai Silk Road strategy and an increasing prevalence of e-commerce and third-party logistics (3PL) providers in the city should drive demand through the second half of the year.
Dubai has a long history of goods transit, but the Emirates has gone through a physical transformation as local economies become consumers rather than just being a point through which goods are transported. As such, the local market is already changing the demands of the supply chain and logistics processes. At the recent Warehouse Summit MENA, National Association of Freight & Logistics President, Nadia Abdul Aziz noted that the UAE market was currently the third strongest logistics market in the world and the regional leader. To maintain its robust global position, the Savills report predicts that the government’s visionary Dubai Silk Road strategy, will play a strong role in spiking demand for warehousing and industrial space in the city, especially among Chinese investors. The Dubai Silk Road strategy focuses on enhancing trade between free zones, the Emirates, and connecting logistics services including between DP World locations across the world.
James Lynch, Head of Industrial and Logistics at Savills Dubai said: “Demand in the industrial and warehousing sectors has been subdued in the first half of 2019. The transactions we have seen are towards spaces that have been built-to-suit and a ‘flight to quality’ as organisations seek operational efficiencies through improved facilities. Landlords are increasingly flexible, so there are good opportunities available for those pursuing space upgrades. The positive news is that we are predicting government initiatives, such as the Dubai Silk Road, will create uplift in demand, while private sector growth in the ecommerce and 3PL sectors can also boost performance in the second half of this year.”
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