Dubai, UAE: The UAE Industrial and Logistics Market Review released by Knight Frank Middle East today shows that, due to the short to medium term impact on trade volumes globally as a result of Covid-19, the UAE’s industrial and logistics sectors will be materially impacted particularly given its re-export hub status.
Despite this, the long-term fundamentals underpinning the industrial and logistics sector in the UAE remain steadfast. Given its modern transport infrastructure, ranked 8th globally according to the World Economic forum’s Global Competitiveness Report 2019, combined with its central location, means that UAE is an attractive proposition for global businesses looking to extend their foot-print into emerging markets by using the UAE as a regional supply and re-distribution gateway.
Matthew Dadd, Partner, Occupier Solutions Commercial Agency at Knight Frank Middle East said: “Despite the challenges brought about by the Covid-19 outbreak, the long-term fundamentals underpinning the industrial and logistics sector in the UAE remain steadfast. In the short term, both the Abu Dhabi and Dubai governments have focused their respective stimulus packages to support this sector through the pandemic.”
Data from Oxford Economics shows that over the 10 year period to 2030, the UAE’s industry sector is expected to grow by 18.4%, and its transport, storage and IT sector by 32.3%.
On the back of the projected economic growth in these sectors, employment is also expected to grow with employment in the UAE’s industry sector expected to increase by almost 256,000 and by almost 96,000 in its transport, storage and IT sector over the 10 year period to 2030.
Occupier Market
Prime and Grade A stock in the logistics-warehousing segment of the market has seen a strong level of take up from both e-commerce firms and from third party logistics operators.
In comparison to Prime and Grade A stock, Grade B stock continues to witness limited levels of demand due to the lack of quality stock.
Mikhail Vereshchagin, Commercial Agent at Knight Frank Middle East said: “Recent market activity shows that there is still demand from occupiers in the industrial and logistics sector to establish and expand operations in the UAE.”
Investment Market
Investment appetite for industrial and logistics assets remains strong despite the barriers to entry faced by third party developers.
Whilst there is a clear requirement and demand for high quality industrial and logistics centres, most of this requirement is in areas which are near airports or ports.
However, such locations tend to be in Free Zone ownership therefore those under taking construction of a speculatively built asset would in most cases be subject to subleasing fees. These subleasing fees can affect the financial viability of some investments, particularly those looking for medium-term return on investments.
Investors who are willing to undertake projects to supply the undersupplied Prime and Grade A market, with a long term view, are likely to be able to attract new demand at a premium to the market.
Outlook
Taimur Khan, Associate Partner at Knight Frank Middle East said: “Taking a longer term view on the sector, we note there is a gap for international quality Prime and Grade A stock in a number of industrial and logistics areas in the UAE.”
We are witnessing growth in the level of demand for modern warehousing and logistics solutions, which are priced at competitive rates, across a range of size requirements. However, due to the competitive nature of the market today, investors looking to fill this gap will need to be willing to have a medium to long term investment horizon.
-Ends-
For further information, please contact:
Noor Chehayber, Noor.Chehayber@me.knightfrank.com , +971 54 448 8536
Knight Frank has a strong presence in the Middle East with offices in Abu Dhabi, Dubai and Saudi Arabia. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants.
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and together with its New York-based global alliance partner, Newmark Knight Frank, operate from over 523 offices, in 60 territories, and has over 18,000 employees. For further information about the Company, please visit www.knightfrank.com or www.knightfrank.ae
© Press Release 2020Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
