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Tue 25 Aug 2020 10:58 AM

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Why Dubai's warehouse and industrial market is thriving during virus crisis

E-commerce industry driving investment in logistics and warehousing supply chain, according to Savills report

Why Dubai's warehouse and industrial market is thriving during virus crisis

The sudden switch to online shopping during the enforced Covid-19 curfew and lockdown periods fueled increased demand in the industrial and warehousing market in Dubai, according to real estate giants Savills.

The country’s e-commerce sector was issued the highest number of licences – 196 - in May 2020, according to data from the National Economic Register, while the first five months of the year saw a 300 percent rise in consumer demand for e-commerce services.

In comparison, 120 licences were issued to general trade businesses, 115 to project management services, and 97 for building painting activities.

“There was a sudden urgency among companies to shore up their online presence and invest in logistics and warehousing supply chain. As a result, demand for Grade A industrial and warehousing space witnessed a strong increase across Dubai. This is a marked shift from the subdued activity levels which we reported twelve months ago”, said Swapnil Pillai, associate director research Middle East at Savills.

“Transaction activity was driven by existing tenants taking up additional space to increase their inventory carrying capacity and by companies that had to invest in their warehousing and logistics capability to move their sales online.”

The Savills research revealed companies from the healthcare sector were seen taking up warehousing space and industrial land for build-to-suit projects, especially within the Dubai Science Park. There was also a spike in enquiry levels and transactions across Dubai South, driven by the near completion of their first e-fulfilment centre measuring approximately 355,000 sq ft.

Luke Tipp, commercial agent at Savills Middle East, said: “The majority of landlords reported occupiers to be at normal capacity or busier over the last quarter, with freight movements increased give the rise in demand for medical supplies and groceries.

“A number of sub-markets also witnessed a spike in demand for labor accommodations as companies looked to shift their employees from accommodations in other emirates to tackle the challenges posed by the lockdown. Occupancy levels have remained stable and, in a few cases, it has marginally improved as companies have taken up additional space on a short-term basis. We have also witnessed an increase in take-up for land plots form companies to expand their existing facilities.”

On the rental side, it was revealed there hasn’t been rental rebates or reduction being offered to tenants across the warehousing sector. Most of the incentives have been in the form of rent deferrals to help client manage their cash flow. Additionally, there has also been an increase in incentives offered by the government with the aim of supporting the business sectors to enhance financial liquidity.

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