The UAE aims to attract a further US$75 billion into the country?s industrial and manufacturing sector by 2025, as part of the government?s continued diversification efforts to raise non-oil and gas revenues, according to the latest UAE Industrial Market View by global real estate consultancy firm CBRE
Dubai Investment Park (DIP) remains one of the most in demand onshore locations, whilst also boasting an active secondary market. Capital values in the development are now in the range of US$1,089-1,225 per sq m. Whilst industrial rentals across various facility types have experienced deflationary pressures over the last 12 months, ground rents across the market have remained broadly unchanged.
From a location perspective, the majority of new inquiries have been registered for facilities in the freezones, with Jafza the most popular submarket. DIP is also experiencing rising supply levels, with multiple new terraced unit schemes being developed by private developers, with sizes typically ranging from 500?2,000 sq m. As a result, a further easing of rentals for Class 2 stock is anticipated as available product increases.
As conditions have softened, an increasing number of occupiers have started to test the market aiming to secure preferential deals at rates perceived to be under the current market. There also continues to be ?a flight to quality? with occupiers moving from traditional non-freezone industrial areas such as Umm Ramool, Al Quoz and Ras Al Khor, relocating to newer locations such DIP and Dubai Industrial Park.
As the market has slowed, a growing imbalance has emerged between the number of willing sellers and the number of willing buyers, resulting in a contraction of sales prices across key locations. Whilst pressures on rentals have also emerged, with an average seven per cent decline recorded across the market.
Whilst all tracked locations have seen rentals decline or remain flat over the past year, Class 1 industrial assets have generally been the most resilient, recording < five per cent rental reductions over the period. This trend is set to continue in the short-term at least, with limited new quality supply expected.
The Jafza sub market saw no material change in rentals over the past year, underpinned by high occupancy rates for warehouses and light industrial units (LIUs) from the freezone operator (primary market), with only seven to 10 per cent currently vacant. The bulk of these are utilised as occupier incubator facilities, before transitioning to purpose built facilities. However, Jafza?s active secondary market has witnessed an increase in the number of properties available for sub-lease and sale, leading to a decline in capital values over the last 12 months, with rates now equating to around US$586-732 per sq m for Class 1 industrial assets.
Occupiers are understandably keen to take advantage of the prevailing market, to locate to newer facilities with lower rentals, better infrastructure and road connectivity.
Further signs of stress have also emerged with the consolidation of the logistics industry, with a number of smaller firms being acquired by their larger counterparts.
Multiple private developers and funds along with master developers like DSO, Jafza, Dubai South, TECOM, are actively seeking occupiers, with an aim to deliver them custom built-to-suit (BTS) industrial and logistics facilities.
Dubai?s worker accommodation market has remained relatively stable over the last 12 months with the majority of key markets being tracked reporting flat growth - Jebel Ali Industrial Area (0 per cent YoY), Al Quoz (0 per cent YoY). However, DIP has witnessed a five per cent (YoY) reduction in rates, driven by an increase in supply in the sub-market, against weakening demand fundamentals.
The current rentals at Jebel Ali Industrial Area are now around US$953 a room per month, with Al Quoz and DIP at US$1007 a room per month.
