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Fewer industrial-sized warehouses to be built in 2018

by Oscar Rousseau on Mar 1, 2018

Demand may be rising for European-style warehouses in Dubai.
Demand may be rising for European-style warehouses in Dubai.

The law of supply and demand should, in theory, see fewer large-scale warehouses built in Dubai, as the emirate’s free zones are oversupplied.

Senior surveyor in the investment department of Cavendish Maxwell, Andrew Armstrong, told Construction Week that opportunity to build big warehouses still existed in the city.

“In non-free zone areas, development should increase as there is less vacancy and less over supply. However, the reality is that in established non-free zone areas there is little unencumbered land left to develop so construction and or development opportunities are confined.

Armstrong said that the only available non-free zone areas where development could kick off in earnest was Dubai Industrial Park and National Industries Park.

READ: Abu Dhabi Ports in $22m warehouse deal

The glitch here is that both zones do not allow third party sub-leasing, so “development will be limited to owner occupiers”, said Armstrong, who added: “In the current climate we are not seeing an increase in owner occupiers growing or building new premises, thus we expect new development to be limited.”

Armstrong spoke to Construction Week after the launch of Cavendish Maxwell’s report on Dubai’s industrial and logistics market.

While the report noted that fewer industrial warehouses would be built in 2018, it found that developing European-style warehouses could be a niche area of opportunity for construction firms in this particular line of work.

“European-style warehouses have been developed in non- free zone locations as per client requirements, however there have not been any speculative developments, which is where there is an opportunity in the market,” said Armstrong.

He said that there are several parties who have developed European-style warehouses in areas including Dubai South and the Jebel Ali Free Zone. The construction of European-style warehouses may be able to tap into rising expat demand in Dubai for fast-moving consumer goods (FMCG). Firms exporting such products to the UAE prefer goods to be stored in European-style warehouses, Cavendish Maxwell’s report said.