PHOTO
- 6.6 million sqft of new stock is due come to market in Dubai during 2026
- Of the US$ 5bn of industrial contracts awarded in the UAE last year, 33% were in Abu Dhabi
- Abu Dhabi’s industrial project completions are forecast to exceed US$ 1bn in Q1 2026
Dubai: The UAE’s industrial and logistics sector continued to perform strongly in 2025, with rents rising across the board, but space shortages are set to once again define the market in 2026, according to the latest UAE Industrial and Logistics Report from global property consultancy Knight Frank.
Knight Frank recorded high occupancy and sustained rental growth in all key submarkets in 2025, with the UAE’s robust economic fundamentals supporting expansion by local businesses and attracting an influx of overseas occupiers and logistics operators, predominantly from mainland China. In parallel, robust investor appetite for industrial and logistics assets continues to underpin transactional activity across the sector.
Faisal Durrani, Partner – Head of Research, MENA, said: “Investor appetite remains firm and competition for institutional-grade stock continues to strengthen, placing further downward pressure on prime yields towards sub-8% territory. This should support capital values, even as rental growth moderates in parts of the market.
“Looking ahead, new supply may begin to widen the rental performance gap between legacy stock and newer, higher-specification facilities during 2026. Rental levels are anticipated to remain firm, with marginal upside for grade-A properties, while a period of rental stabilisation or modest cooling is expected across grade-B accommodation. However, we expect the demand drivers that have underpinned rental growth over the past few years to be sustained this year.”
DUBAI RENTS ON AN UPWARD TRAJECTORY
Rents in Dubai’s industrial and logistics market continued to climb during 2025, reflecting persistent occupier demand and rising construction and land costs. Al Quoz remained the most expensive industrial submarket in the city, with rents reaching AED 100 psf, underpinned by its central location and strong demand.
Dubai Industrial City recorded the highest year-on-year annual rental growth at 32%, with rents rising to AED 58 psf, driven by large-scale manufacturing demand and constrained high-quality supply. Dubai South followed with a 25% year-on-year increase, pushing average rents to AED 45-55 psf, supported by ongoing requirements from logistics occupiers.
Grade-A assets in the Jebel Ali Free Zone (JAFZA) also experienced strong annual increases in 2025, with rents in JAFZA North and South rising by around 22% to AED 40-45 psf. Elsewhere, established inland locations such as National Industries Park (AED 42-52 psf) and Dubai Investment Park (AED 60-65 psf) saw a broad stabilisation in rents, with higher vacancy levels dampening any upward rental pressure from the wider market’s supply shortages.
Maxim Talmatchi, Partner – Head of Industrial and Logistics, ME, said: “JAFZA remains a notable area of opportunity. While several submarkets have recorded substantial rental growth in recent years, JAFZA has, by comparison, been slower to reprice. With its proximity to Jebel Ali Port and appeal to multinational occupiers, we anticipate scope for further rental growth.”
Knight Frank is tracking 6.6 million sqft of new stock due come to market during 2026, with several projects nearing completion and scheduled for delivery in Q1 and Q3. The pipeline is expected to remain strong during 2027 and 2028, with around 2.2 million sqft and 5.9 million sqft of new completions, respectively.
Talmatchi added: “We expect Dubai’s industrial and logistics supply pipeline between 2026 and 2029 to be relatively stable in the near term, before rising sharply towards the end of our forecast period, reinforcing near-term supply tightness across prime locations. This new supply should offer some relief to occupiers in the form of a stabilisation, or softening in rents in some locations, which we expect could begin towards the end of 2026.”
New requirements in 2025 were led by logistics and manufacturing & industrial occupiers, each accounting for 21% of total demand and underscoring Dubai’s position as a global trading hub. Knight Frank also reported strong demand from retailers and traders (14%) and technology-focused occupiers (12%), highlighting the growing importance of tech-enabled supply chains in the sector.
In terms of unit size, demand in H2 2025 was heavily skewed toward mid-sized warehouses (10,000 – 50,000 sqft), which accounted for 58.1% of requirements, followed by units of 50,000 – 100,000 sqft at 22%. Mega-warehouses of more than 100,000 sqft, while sought after, only accounted for 7.8% of new demand in 2025.
BOLD GROWTH STRATEGY POWERS ABU DHABI MARKET
Abu Dhabi is at the forefront of the UAE’s industrial sector, advancing a strategic vision focused on economic diversification and the establishment of a robust, sustainable industrial base. Of the US$ 5bn of industrial contracts awarded in the UAE last year, 33% were in Abu Dhabi.
Rental growth in the emirate was more subdued than in Dubai during 2025, with a clear hierarchy driven by location, quality and proximity to strategic transport corridors. At AED 625 psm, the Abu Dhabi Airports Free Zone commands the highest average rents, reflecting its free zone status, location and strong appeal to high-value logistics occupiers. This is followed by KEZAD Mussafah (ICAD) and Al Falah, which both averaged AED 550 psm as at the end of Q4 2025, and Mussafah (AED 500 psm).
Talmatchi said: “Market conditions in Abu Dhabi are likely to remain broadly stable through 2026, with demand anchored around the ICAD and KEZAD clusters, which continues to be the emirate’s principal industrial and manufacturing base. We expect prime assets to maintain high occupancy, supported by steady occupier requirements and limited frictional vacancy. A disciplined approach to land release and development remains a key stabilising influence, restricting excess supply and limiting volatility in rental performance.”
In Q1 2026, industrial project completions in the emirate are expected to exceed US$ 1bn, coinciding with a peak of more than US$ 2.4bn across the UAE. Forward forecasts suggest Abu Dhabi will record another major peak in Q1 2029, with project values approaching US$ 1.2bn.
A key catalyst for this expansion is the Abu Dhabi Industrial Strategy, which aims to more than double the size of the emirate’s manufacturing sector to AED 172bn (US$ 46.8bn) by 2031. Particular emphasis is being placed on attracting foreign direct investment, while also supporting the growth of domestic industries across priority sectors such as chemicals, machinery, electronics and pharmaceuticals.
Durrani concluded: “The UAE’s industrial and logistics market is transitioning into a more mature stage of its cycle. Performance will increasingly be determined at the asset level – location, specification, tenant quality and active management will matter more than scale alone. For owners and investors, this reinforces the importance of disciplined acquisition and proactive asset strategies. For occupiers, the best-value opportunities are likely to be concentrated in secondary stock, while competition for well-located, high-quality space should remain firm. The medium- to long-term outlook remains positive, with occupiers expected to continue gravitating towards high specification and quality assets.”
ABOUT KNIGHT FRANK
Knight Frank LLP is the leading independent global property consultancy.
Headquartered in London, the Knight Frank network has 600+ offices across 50+ territories and more than 20,000 people. The group advises clients ranging from individual owners and buyers to major developers, investors, and corporate tenants. For further information about Knight Frank, please visit www.knightfrank.com.
In the MENA region, Knight Frank has strategically positioned offices in key countries such as the United Arab Emirates, Saudi Arabia, Bahrain, Qatar and Egypt. For the past 17 years, the firm has offered integrated residential and commercial real estate services, including transactional support, consultancy, and property management. Understanding the unique intricacies of local markets is at the core of Knight Frank’s work, blending this understandingng with global resources to provide clients with tailored solutions.
