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Sat 13 Aug 2016 12:19 AM

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Dubai industrial rents fall as summer demand eases

New report says demand continues to be impacted by curtailed global trade volume and continuing oil price fluctuation

Dubai industrial rents fall as summer demand eases
Dubai Investments Park.

Average rents in Dubai’s industrial real estate sector fell throughout the summer months as demand was impacted by curtailed global trade volume and continuing oil price fluctuation, according to a new report.

The latest Industrial Market Performance report for summer 2016 from Core, UAE Associate of Savills, revealed a sizeable gap in rental rates between Grade A and Grade B stock, which is attributed to build quality, scope for special and infrastructure expansion and ease of access.

The report said current overall sluggish demand will keep rents flat or slightly lower for the rest of 2016.

CEO David Godchaux said: “Many of the existing occupiers are trying to optimise current footprint and evaluate relocation costs while new entrants are generally cautious when undertaking their first phase expansions in the region.

"This has led to a marginal release in supply, albeit mostly in the Grade B category. Ready built Grade A stock continues to attract tenants while large logistics requirements are purpose built and are mostly positioned in the newer submarkets.”

The report said Al Quoz saw its overall rents depreciate by 8 percent year-on-year while Ras Al Khor witnessed a 5 percent dip.

Godchaux added: “Established areas such as Al Quoz and Ras Al Khor continue to witness high occupancies – although older stock and limited room for expansion is pushing rents towards a downward adjustment.”

The report noted that Jebel Ali Freezone Authority witnessed a 9 percent year-on-year softening in its overall rentals despite continuing to attract international occupiers . 

“The spill-over of smaller and on-shore requirements is largely catered by the Jebel Ali industrial area as it offers supply in all formats and sizes such as manufacturing, warehousing and land plots, but with predominantly Grade B build quality,” said Godchaux.

Core said that new manufacturing activity in Dubai is largely positioned between the industrial zone within Dubai Investments Park (DIP) and Dubai Industrial City (DIC).

“The future drivers for Dubai’s industrial and logistics sector will be the servicing of maturing local and regional economies, strengthening its position as a global hub. The government is bolstering this position through the recent announcements of the new Dubai Wholesale City and Dubai Industrial Strategy, aimed at increasing total output and creating value for the manufacturing and logistics sectors," said Godchaux. 

“These new initiatives should propel trade volumes and in turn strengthen the industrial real estate in the mid to long term but may fall short to drive immediate demand in the near term. The current overall sluggish demand marks a revision of our near term outlook as we expect rents to remain flat or contract marginally for following two quarters,” he added.

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