John Bambridge examines the overnight rise of the non-free zone
The rapid occupation of the most recently completed facilities at Dubai Industrial City provides a bellwether for the state of manufacturing and construction supply in the UAE. John Bambridge examines the overnight rise of the non-free zone.
The final and second warehouse development phase of Dubai Industrial City, also known simply as Dubai Industrial (DI), commenced in January last year at a cost of $204m.
It culminated more than half a decade of development on the 55km2 project and highlighted the confidence in the UAE that the industrial sector, one of few that largely weathered the economic crisis, will continue to grow.
The phase itself comprised 325,000m2 of warehouses and retail showrooms equipped with back storage, doubling the previous size of the current storage facilities, as well as 280,000m2 of open storage yards with tarmac and with 24/7 security laid on, bringing the total amount of storage at the light to medium industrial destination to 929,000m2 – by far the largest offering of its kind in the UAE.
The completion of these warehouses and storage facilities over the course of last year has been accompanied by the almost immediate occupation.
DI’s results for 2012 show that 82% of its warehouses are now occupied and operational, and a further 279,000m2 of open storage yard has been similarly leased.
However, the most dramatic figure for DI’s activity in 2012 is an 82% rise in the number of companies in DI, with their number rising from 259 to 471 in the twelve month period ending December 2012.
“Last year was a really successfully year for us,” Abdullah Belhoul, DI managing director, tells CW on the sidelines of the results announcement.
“We could see a growth, we could see an increase in demand, and coping with this demand we had to put more into our infrastructure projects as well, putting more investment into new projects to keep up with the demand of the market.”
Overall, a total of $1.63bn (AED6bn) in public and private money has been invested in the industrial zone’s expanse, with $231min infrastructure, $360m in labour villages, $61.2m in the office buildings, $435m in pre-built units for storage and light industrial use and $544m in private investment.
Of the private investment as significant portion is directed towards the construction of factories on DI’s leased industrial land.
Belhoul notes: “There are two types of people – either they will build, or they occupy existing facilities, like our warehousing projects we have already built. We achieved this year a total of 100 clients in terms of land industrial, and the number is growing.”
Commenting on the 2005 masterplan he adds: “In terms of its masterplan Dubai Industrial City is unique, because it has multiple offerings under one roof. Besides this DI has its own strategic location between the capital Abu Dhabi and also Jebel Ali port and Dubai World Central.”
This split land-use model is key in the DI and the leasing of industrial land for plants and factories also increased by 14% during 2012.
So far a total of 20 factories are built and operational, and a further 35 factories are in the process of being built - an increase of 175% on the 20 already constructed.
“We achieved this year a total of 100 clients in terms of land industrial, and the number is growing,” Belhoul states.
Finally, 74 residential buildings with an area of 650,000m2 and four commercial buildings with 37,000m2 of office space also provision the industrial zone.
Belhoul adds: “It is our plan to draw multiple clients that take more than one product – industrial land, warehouse space and accommodation.
“The industrial sector demonstrated a lot of stability during the rough times and it will have a high potential rate of growth in the near future,” he explains.
Notably DI has experienced a consistently high growth rate over the past two years from the trend of industrial facilities moving to non-free zones, where 51% local ownership prevails, to cater to business in the GCC region.
“Also the UAE government is looking to increase the contributions of the sector to GDP, so you see the sector is the most stable and it will grow,” he adds. “It stresses on the importance of the industrial sector, being the second largest contributor to the total GDP of the United Arab Emirates.”
In terms of supply directly back to the construction sector Belhoul notes: “I think we have reached the stability stage now. Maybe there will be a growth in 2013 with all the new projects announced by the government.”
Examples of new clients with links to the construction sector include New Interpro Wood Industries in terms of supply and the Juma Al Majid Group, which carries out contracting.
On top of this, a memorandum of under-standing was recently signed by DI with the UAE’s Ministry of Economy. Belhoul comments: “We have recently signed an MOU to support the industrial sector and increase the cooperation between both of our organizations, as well as with the private sector to drive the economic diversification process in line with Vision 2021.
“There are three parts of the MoU. One part will facilitate our investors, the second part will bridge the relationship between us and the ministry, and the third part is that the minstry will promote our investor overseas.
It positions DI as a preferred destination for the industrial sector at the local and regional levels.”
What remains to be seen is how sustainable DI will be, and if it can provide a model, like many other recent UAE projects, for tackling environmental before they set in.
DI’s governing authority Tecom investments recently collected 1,100 tonnes of recyclable waste in its Dubai Media City, Dubai Internet City and Dubai Knowledge Village freezones.
While it remains to be seen whether the body intends to similar programmes in DI, the same process would make the same if not more sense in an industrial production environment. 2007, Tecom has achieved reductions in its electricity-related CO2 of 16% and in its water-related CO2 of 39%.
“DI operates under Dubai government, so Dubai law will apply to any manufacturer or party that builds or operates in the industrial city,” says Belhoul.
“Aside from this, DI comes with its own initiatives. We ran a recycling campaign for steel, wood and other materials across our warehousing facilities, and it was very successful, bringing waste drastically down, especially with industrial waste.
We see this as a very promising sector, and the government openly encourages the private sector to be more involved in this.”
Looking to the future Belhoul is only optimistic about DI’s potential. Situated between Jebel Ali port, the road network between Dubai and Abu Dhabi and near to the emerging Dubai World Central aviation master development, it seems unlikely that demand for DI space will decline. The door also remains open for further phases should the market demand arise.
Belhoul ends: “You can see that there is a potential for growth in this sector. There are a lot of international player who have come and settled in the region, and you can see how the industry is evolving, also like a revolution here in Dubai, with the state of infrastructure that is provided by sea land and air. This sector is drastically unfolding day by day.”
- 82% Warehouses occupied
- $1.63bn Investment in DIC
- 471 Companies in DIC