UAE could be global leading logistics hub, says JLL

Investors in the retail real estate sector must look for adaptability

  
DP World Logistics partner at the 2019 World Energy Congress. Image used for illustrative purpose.

DP World Logistics partner at the 2019 World Energy Congress. Image used for illustrative purpose.

DP World/handout via Zawya

The UAE has a tremendous opportunity to become a global leading logistics hub, thanks to its central geographical location, according to property consultancy JLL.

Delegates at the Cityscape Global Conference in Dubai heard highlights from JLL's Redefining Retail Logistics report, ahead of its launch Wednesday.

Thierry Delvaux, CEO, MEA, JLL, said that in 2019, for the first time, there was as much volume invested in logistics globally as there is in retail, with European markets commanding the same yields for logistics spaces as retail spaces.

In addition, while all regional GDPs decreased in 2018, logistics was the only sector that commanded rent increases across the board. The trends were part of a move towards e-commerce globally, he said.

“I believe that in 10 years’ time, you will only go to the store for the experience. Everything else you will buy online.”

JLL’s head of research for the MENA region, Craig Plumb, also told delegates that investors in the retail real estate sector must be aware of a merging of the logistics and retail markets, and look for adaptability and scalability.

This will facilitate the future ‘omnichannel’ distribution and supply chain, as models such as click and collect, delivery via courier, and increasingly, robots or drones, become routine for retailers. 

He said: “There will always be a role for the store, but the role of the store will change. We are going to see click and collect technology introduced in the stores, you are going to be able to try on the product, the makeup whatever it is, in a much more interactive fashion than in the past. You’re going to see apps.

“These are just some of the examples of global retailers adopting to the change. Global retailers are not moving away from stores, but they probably need smaller stores and less stores, and they will be different from what they have had in the past.”

The retail sector is undergoing massive change, Plumb said, with competition, technology, consumer expectation and global economic environment the four sets of drivers that are disrupting it.

“7000 retail stores have closed in the USA over the last six months,” he said. “JLL estimates that 25 per cent of all the retail space in the UK could become redundant by 2025.

“We have gone from the old traditional bricks and mortar shop where everything needs to be stored in a warehouse, shipped to the shop, then customers used to come and buy it and take it home. We are now in an omnichannel supply chain. For success in retail these days, retailers have to have different delivery mechanisms, different supply chain mechanisms, whether it’s from delivery vans, robots or drones, it’s all about getting the goods from the store to the customer in an efficient manner.”

Dubai is already the most active logistics hub and the most active retail hub in the Middle East, home to 3.8 million square metres of mall-based retail, which will increase to 5.3 million square metres by the end of 2020, said Plumb.  

The emirate boasts 1.3 square metres of retail space per person in Dubai, compared to 0.48 square metres in Madrid.

However, e-commerce is relatively small compared to global standards, at just five per cent of retail sales compared to 14 per cent globally, but is expected to grow rapidly, which will in turn boost the requirement for logistics space.

There are currently 147 million square metres of land allocated to industrial space in Dubai, of which 35 million is logistics space, he added.

(Reporting by Imogen Lillywhite; Editing by Brinda Darasha)

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