Dubai Industrial and Logistics Market Makes Strong Signs in 2012

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Cluttons industrial and logistics report
Cluttons industrial and logistics report

Dubai Industrial and Logistics Market Makes Strong Signs in 2012:  Cluttons Dubai’s latest Industrial and Logistics sector report.

Now we are just over halfway through 2012, Cluttons can confirm an improvement in the light industrial and logistics market in Dubai when compared to the same period in 2011.  Enquiry levels are significantly up with existing companies wishing to expand and new companies looking to enter the market.

A property downturn can be defined by a lack of demand for new premises, which has not been the case in Dubai this year.  Higher activity levels have encouraged us so far this year and there has been no sign of activity tailing off as summer approaches.  Over the last four weeks Cluttons has worked on active enquiries totalling 45,000 sq m for 5 companies as well as a single new development project for a new headquarters distribution centre of over 55,000 sq m.  Announcements in the press such as Nestle taking a 175,000 sq m plot at Dubai World Central have confirmed confidence in the Free Zone and non- Free Zone environments.

“The fact that we have worked on this scale of enquiries partly reflects the increased market penetration of the Cluttons Light Industrial and Logistics Team, dedicated to this sector,” states Will Wright, Head of Industrial and Logistics agency at Cluttons Middle East.  “It also is a reflection of the better market conditions in which we are operating” he concludes.

To support this, Dubai Investment Park, the most advanced non- free zone business park in the region, has a reported take up of over 300,000 sq m of built up area this calendar year so far.  Land here has been in short supply for some time.  Only 1% of the land dedicated to the sector remains available.  Furthermore, Dubai Industrial City has confirmed that they have reached 75% occupancy of the 1,250 million AED logistics and warehouse project that extends to 10 million square feet and includes warehouses, showrooms and surfaced open yard areas.

Interest in plot acquisition is equally positive; we have seen numerous small parcels changing hands but have worked on two larger land acquisitions totalling 80,000 square metres.

The investment market continues to suffer from a lack of good quality stock.  The only investment building we are aware of this month is seeking a return of 8.5% on the initial income, the low yield reflecting the amount of interest.  This is for a new build, high specification premises let to an international company.

Rents are currently ranging from 17 to 33 AED per square foot per annum across the region. The lower end of the price range is for poor quality or badly located stock, or small units in terraces with no loading or manoeuvring space.  The higher end of the price range is for high quality buildings in good locations.  These levels are bettered on rare occasions but usually by businesses needing to locate in Ras Al Khor or Al Quoz for specific reasons.

Looking forward to the next 6 months, Cluttons forecasts that enquiry levels will continue at similar levels of Q1 and Q2 2012 as we continue to see existing companies expand and new companies enter the market.  As a result of this, we may see further absorption of the speculatively built Light Industrial Units (LIU’s) throughout the Emirate’s industrial locations and could see additional build to suit requirements being generated because of a demand for buildings that are not available in the market currently.

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