Dubai warehouse shortage to ease over next two years

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MARKET BOOM: The growth of Dubai’s logistics industry has boosted demand for storage space although projects such as Dubai Logistics City will help correct the market.

Demand for warehousing space in Dubai is currently three times more than capacity, according to industry sources, although a series of large scale industrial zones in the emirate will help to ease the situation in the next couple of years.

International logistics companies such as Kuehne + Nagel have outlined their expansion plans in the Middle East to capitalise on record demand for warehousing and distribution services. However, with limited options currently available for the establishment of storage facilities, the market will only experience a correction when projects such as Dubai Logistics City and Dubai Industrial City become fully operational.

“We are trying to get our hands on space, but it’s certainly become a challenge. Although warehouses are being constructed like crazy in Dubai, it will take some time before these actually become operational. In the meantime, industrial areas such as Jebel Ali Free Zone have pretty much reached capacity,” said Wilken Helms, regional assistant manager for contract logistics at Kuehne + Nagel.

“We have our eyes on Dubai Logistics City, although I don’t believe cost-effective warehousing will be available in the market for another one or two years,” he added.

Dubai has emerged as a regional hub for the logistics industry over the past decade, with significant growth in the amount of cargo being handled throughout the emirate. The number of 20ft equivalent units (TEUs) passing through Jebel Ali Port, for example, has increased from 3.5 million in 2001 to 9.5 million last year. If current trends continue, the port’s operator DP World believes that throughput will exceed 80 million TEUs by 2030.

As a result of market growth, demand for warehouse space has continued to skyrocket, placing a strain on current levels of storage capacity within the emirate.

“There is a shortage of warehousing in the region, especially professional warehousing,” said Wajih Baroudi, CEO of Logistica, a Kuwaiti firm looking to establish a contract logistics operation in Dubai Logistics City. “Many projects that are being developed now will be ready in three to five years and when they become available, there will be a huge supply of warehousing.”

To combat the local shortage of warehousing space, Dubai Industrial City recently announced plans to double its storage facilities by the end of the year, after successfully leasing the initial phase of its warehousing complex, measuring 1.5 million square feet.

Rashed Al Ansari, vice president of Dubai Industrial City, explained that a variety of regional and international businesses had leased the first generation of warehouses, each measuring between 5000 square feet and 10,000 square feet. In addition, a number of customers had taken advantage of a flexible option to expand their facilities in multiples, depending on their specific requirements.

“This is an indication of the dynamism of the industrial sector, which is experiencing a tremendous boom in the city,” he said. “We are positive about the future of warehouses here. With an additional 1.5 million square feet of warehouses, we will consolidate our position in the market as a leading player in Dubai’s logistics industry.”

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