Dubai set to be Middle East hub for e-com: Savills

29 Jan '20
3 min read
Pic: Shutterstock
Pic: Shutterstock

E-commerce is the top sector driving demand for warehousing sector in Dubai, followed by engineering and manufacturing along with third-party logistics (3PL), according to global real estate consultancy Savills, whose Dubai Industrial Market report for 2019 second half released recently found there is a renewed focus on sustainable development across the sector.

“After a prolonged period of subdued demand levels throughout 2018, industrial and warehousing space witnessed a strong increase in market activity on the back of a spike in renewal, relocation and consolidation exercises. Most of these transactions that were under discussion over the last few quarters and were completed during H2 2019 on account of proactive measures implemented by the government such as reducing fees for business incorporation, relaxing FDI norms, among others,” Murray Strang, head of Dubai office at Savills, said in a press release.

A healthy mix of small, medium and large sized transactions were observed across most micro-markets. The majority of the demand was concentrated across locations like Dubai South, Jebel Ali Free Zone Authority (JAFZA), Dubai Investments Park (DIP) and National Industrial Park (NIP).

Demand drivers across these micro-markets varied depending on various factors like the nature of the business and warehousing specifications.

The emergence of new concepts such as ‘cloud kitchens’ and ‘vertical farming’ has also had a positive impact on warehousing demand in the city. Occupiers from the food and beverage sector and select 3PL companies that service the domestic market continue to display a preference for Al Quoz due to its central location.

While JAFZA remained the prime venue for engineering and manufacturing businesses, Dubai South emerged as arguably the preferred location for e-commerce companies and 3PL players during 2019.

During the second half of 2019, close to 350,000 sq ft of warehousing space was leased across Dubai South by government entities, international e-commerce companies and automotive spare part manufacturers among other firms. More than 750,000 sq. ft. of land was also leased on a long-term basis across Dubai South, making it one of the most active industrial and warehousing markets during the period.

DIP and JAFZA were among the other key markets to witness strong demand during the review period. In DIP, new leases (accounting for 70 per cent share of total transactions) and renewals summed up the 200,000 sq ft of transaction activity concluded by the industrial experts at Savills.

Out of the 12 key warehousing and industrial micro-markets in Dubai, rental correction was observed across only five micro-markets when compared to H1 2019 while they have remained stable across all the other locations.

Landlords are anticipated to remain flexible around lease terms and rental rates in 2020. This will continue to support demand for good quality stock in the city. Demand is likely to remain strong from existing sectors and emerging industries, the report said.

Fibre2Fashion News Desk (DS)

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