Global economic anxiety and slower growth in regional markets have played a significant role in the decline in demand for industrial real estate in Dubai, which in turn has led to capital value corrections in most areas. sub-markets of the emirate, according to international real estate consultancy Cluttons. .
Dubai’s biannual industrial market report for spring 2017 shows activity in the sector has declined, despite being among the most resilient in the emirate over the past two years. Research says stocks are still perceived to be meager, and notes that some opportunistic buyers are now making acquisitions in secondary submarkets.
Research manager Faisal Durrani said: âIn addition to a natural cyclical correction that was inevitable in the industrial market, an increase in new warehouses completed over the past two years has caused a flight to quality among existing occupants, creating a growing pool of more secondary space, which is slow to rent. This is driving a growing rent gap between older inventory and modern, state-of-the-art warehouses.
“As we expect weakness to persist this year, opportunistic investors have quickly taken advantage of calmer conditions, prompted by falling equity values, especially in more secondary locations where stocks are perceived to be meager. . “
As the Cluttons report points out, some JAFZA inventories suffered price reductions of up to 20% during 2016, largely due to the migration of occupants from older facilities to older facilities. recent in the region. JAFZA North, the original home of JAFZA, is experiencing an increasing amount of secondary stock as occupants drift to new facilities in JAFZA South. This prompted the JAFZA authorities to incentivize the occupants by offering them operational incentives, including reducing overall installation and licensing costs. Additionally, the report mentions that Class A rents have shown greater stability, with 8 of the 12 submarkets tracked by Cluttons not recording any change in 2016.
Murray Strang, Director of Cluttons Dubai, said: âDespite the gloomy conditions, we continue to register interest from international occupiers trying to gain a foothold in the market as they still see Dubai as the main gateway to the market. Middle East and Africa. In particular, logistics and distribution centers remain popular among food and beverage retailers and users, supported by the strength of Dubai’s tourism and hospitality market. To some extent, logistics and distribution offset weakness in other industrial sub-sectors, such as manufacturing, heavy metals, oil and gas.
The industry bulletin confirmed that bespoke installations remain popular among cost-conscious developers and occupants, especially those unable to locate and secure large amounts of space. Carrefour, for example, recently opted to build a custom-built 800,000 square foot facility to support its vast network of regional supermarkets. Following the trend, Landmark, Mohebi Logistics and Aramex are also building big box distribution centers in Dubai to expand their capabilities in the region.
Strang concluded, âWe expect logistics and distribution assets to continue to perform well during the year, driven by a strong national economy and sustained growth in the tourism and hospitality sector. The looming World Expo 2020 should help build a more stable image towards the end of 2017. â