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|10 July, 2017

Ecommerce offers some boost for Dubai’s industrial realty

Developers will cheer the fact that headline rents have been steady

Monday, Jul 10, 2017

Dubai

The ecommerce drive is offering a ballast not just for the retail sector but for Dubai’s industrial real estate as well.

According to a Cluttons report, Amazon is mulling the possibility of a built-to-suit logistics facility after its acquisition of Souq.com, while Noon.com, awaiting its formal launch of operations, has set up a 195,000 square feet fulfilment centre in Dubai South.

But if one looks beyond ecommerce led possibilities, Dubai’s industrial real estate remains under pressure. “Demand has continued to ease throughout 2017, exacerbated at present by the seasonal summer slowdown, with inquiry levels noticeably lower than at the start of the year,” the report says. “The persistence of an unstable global economic outlook which has caused requirement levels to ebb across the city and indeed the region as a whole, a growing amount of speculatively developed warehouse space and increased competition among landlords have contributed to the increasingly stagnant conditions.”

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Developers will cheer the fact that headline rents have been steady, though those at Dubai Investments Park, Dubai Industrial Park and Dubai South have had softenings of “between 4 and 12 per cent over the last 12 months”, Cluttons notes.

Down the line, the additional supply, some of which built with a speculative intent, is likely to put pressure on rents. “More secondary stock (is) likely to face sharper corrections over the course of the next six months as activity levels are expected to remain subdued,” the report adds.

“With the rising amount of stock in the market, landlords are expected to lower asking rents to entice relocation activity and we expect occupiers to capitalise on this. With that in mind, it is our expectation that rents may dip on average by up to 5 per cent between now and the end of the year, before there is the potential for increased stability as the Expo 2020 economic boost starts to materialise in early 2018.”

Staff Report

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