Dubai industrial space prices soften but demand remains

Prices in Dubai’s industrial real estate market softened in the first half of the year but transaction volumes were maintained in free zone and non-free zone areas, according to real estate consultancy Cluttons.

The firm said demand partly came from occupiers moving and expanding their operations in greater numbers towards Dubai South in the build-up to the expansion of Al Maktoum International Airport and World Expo 2020.

Nearby areas including Jebel Ali Free Zone and Dubai Investments Park are also receiving the greater share of occupier interest, with the seasonal push for logistics contracts into Q3 expected.

“Interestingly, rents for Class A units in areas around Al Maktoum International Airport now stand at Dhs 60 psf, the same level as at Dubai Airport Free Zone, which goes to show the rising popularity of areas towards the new airport, where the next stage of expansion is set to be announced in the near term,” said Cluttons head of research Faisal Durrani.

Cluttons said the emirate’s most expensive area for Class A and B industrial space was Silicon Oasis at Dhs 77 and Dhs 65 psf respectively.

Jebel Ali Industrial Area remained the most competitive area for Class A space with rents of Dhs 35 psf and Jebel Ali Free Zone for secondary space at Dhs 24 psf.

Elsewhere, the firm noted activity had increased in Dubai Science Park, where a second phase of warehouse space is expected to be completed in 2017.

Build-to-suit facilities also saw increasing interest in Dubai South and JAFZ, with the former announcing that developers and investors would be able to buy land in freehold areas of the development.

“Looking ahead, it is our expectation that rents for warehouses will continue to remain relatively unchanged over the next six to twelve months. With a stable and healthy level of occupier activity and a steady stream of speculative development, we are not expecting to see any major swings in average lease rates,” said Cluttons Dubai head Murray Strang.

While a slight upturn in warehousing activity is expected as Expo 2020 draws closer.

“We are yet to see a major Expo-linked boost to the market; however this is something we expect will materialise 18-24 months prior to the event. Specifically, we expect to see requirements from the construction, hospitality and food and beverage sectors start to tick up directly as a result of the 2020 Expo,” he said.