Dubai's industrial property sector hit by supply, demand mismatch

Savills report says landlords in Dubai are increasingly flexible, offering good opportunities for those pursuing space upgrades
Dubai's industrial property sector hit by supply, demand mismatch
By Sam Bridge
Fri 28 Jun 2019 06:10 PM

A supply and demand mismatch has created a challenging time for the Dubai industrial and warehousing markets, according to new research from real estate advisor Savills.

Its Dubai Industrial Market report for the first half of 2019 showed that Grade A property rents dropped by between 4-6 percent across the city, and Grade B rental values fell by 8-10 percent, based on a half-yearly comparison.

However, initiatives such as the Dubai Silk Road strategy and an increasing prevalence of e-commerce and third-party logistics providers in the city should drive demand through the second half of the year, Savills said.

James Lynch, head of Industrial and Logistics at Savills Dubai said: “Demand in the industrial and warehousing sectors has been subdued in the first half of 2019.

"The transactions we have seen are towards spaces that have been built-to-suit and a ‘flight to quality’ as organisations seek operational efficiencies through improved facilities."

He said landlords in Dubai are increasingly flexible, offering good opportunities for those pursuing space upgrades.

"The positive news is that we are predicting government initiatives, such as the Dubai Silk Road, will create uplift in demand, while private sector growth in the ecommerce and 3PL sectors can also boost performance in the second half of this year,” Lynch added.

Savills said Dubai has a long history of goods transit, but the UAE has gone through a physical transformation as local economies become consumers rather than just being a point through which goods are transported. As such, the local market is already changing the demands of the supply chain and logistics processes.

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