Decline in industrial rents will be marginal as rates begin to level over the next 12 months, according to an expert.
“Any further fall in leasing rates is likely to be marginal as rents begin to level over the next 12 months. Overall interest in the industrial and logistics sectors looks to be expanding with a number of major infrastructure projects planned and under way in the UAE,” Matthew Green, Head of Research and Consultancy UAE, CB Richard Ellis, told Emirates 24|7.
The recent opening of the Al Maktoum International Airport is seen as another important piece in the jigsaw as Dubai looks to cement its place as a leader in the regional logistics market, he added.
Aided by its central location between Africa and Asia, Dubai is exploiting this competitive advantage to help drive future growth in industry.
Expansion of the industrial and logistics sectors is now expected to become a major driver of the economy, buoyed by the massive planned expansion of local carriers including Emirates and flydubai, and the continued success of industrial free zones in attracting new investment to the emirate.
A CBRE report earlier said prime rent in Dubai fell 16.67 per cent to Dh25 per square foot with the percentage change from the peak being 44.44 per cent.
According to Green, the real estate cost savings that were once a major driver for the Northern Emirates are no longer as relevant as all sectors of the real estate market have become more affordable over the past 18 months.
“Companies once constrained by the cost of labour and accommodation for their skilled workforce are now seeing the benefits of relocating to Dubai and Abu Dhabi. Ongoing infrastructure issues and power outages are also a major concern for occupiers and thus key drivers for relocations at this time,” he said.
Asked if warehouse owners were offering any incentives to attract tenants, Green said there has been minimal growth in the availability of incentives within the industrial sector with reduced leasing rates.
“But there is a possibility of a small rent-free provision. This is in stark contrast to the commercial office sector where significant rent-free periods and capital contributions towards fit-out can be found. This differential is largely reflective of the market fundamentals at play, with the industrial sector less impacted by oversupply and reduced demand,” he added.
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