Shortage of warehouses to ease next year

The shortage of third party logistics warehouses in Dubai is set to ease next year as the construction of more facilities continues, say analysts and industry sources.

Work on several warehousing projects has entered the final stages while existing stores are being expanded to create enough room to meet demand.

"Finding a good warehouse in Dubai remains an uphill task for many businesses today," Rajesh Mukherjee, General Manager of Transworld Logistics Park, told Emirates Business. "However, there is hope that with the current construction of new warehouses as well as the creation of special logistics zones this will end."

Mukherjee believes the current supply-demand gap will be narrowed by new innovations in the logistics sector in Dubai, where demand for warehouse storage is three times greater than the capacity.

The logistics industry in Dubai estimates that the shortage of good warehouses ranges from between 90,000 square metres to 100,000 sq m.

Industry sources say good warehouses are those that offer a full supply chain solution besides storage.

As Dubai attempts to position its self as a regional and global logistics hub, the increase in cargo volumes is presenting serious capacity challenges to logistic companies and importers as the shortage of storage facilities grows more acute.

The number of cargo imports have increased over the years with the number of 20ft equivalent units (TEUs) passing through Jebel Ali Port rising from 3.5 million in 2001 to 9.5m in 2007.

The throughput at the port is expected to exceed 80 million TEUs by 2030, according to DP World officials.

The shortage of warehouse space has been compounded by a general lack of commercial space for expansion which is a result of the construction boom.

"Lack of enough storage space is the biggest challenge facing any logistics company at the moment," said Mukherjee. "Any new additional space that comes up gets taken immediately."

Demand for warehouses has been on the rise for the past three years and capacity problems as well as rental costs are continuing to increase. The average rental price per cubic metre of space in Dubai is 70 fils per day – up from 40 fils per day at the beginning of this year.

But Martin Palmer, Director of Contract Logistic at Al Futtaim Logistics, believes that in a year's time the shortage of storage space will ease. "I cannot say that the problem will disappear this year," he said. "However, there are indications that shortage problems will ease in the coming year as most new warehousing projects are completed."

He said the strongest demand was for high roofed warehouses with a racking system and that most investors were currently building this type to cash in on the demand. New centres such at the Dubai Logistics City (DLC), Dubai Investment Park and Dubai Industrial City will provide space for warehousing companies in anticipation of increasing cargo volumes.

Several Dubai-based and international companies have already leased land at the centres as part of their expansion strategies aimed at coping with increasing demand. Of the 12 square kilometre of leasable land at DLC, 40 per cent has been leased out so far and construction of the leased part is expected to be completed in 2009. The contract logistics area is filling up rapidly and will be more or less committed by 2010.

Big names in Dubai's logistics market such as DHL, Fedex, GAC and Al Futtaim will add more than 40,000 sq m of warehousing space by the end of 2009.

Industry sources believe that logistics companies will start to adopt intelligent or automated warehousing systems which are more efficient in terms of handling goods than conventional ones and helps to create more storage room.

The unprecedented demand for storage space has seen more property developers channelling their funds into the construction of warehouses, which are thought to provide faster returns on investments than other types of property.

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