Tech driving demand for industrial property in Dubai

Technology growth spurred by Dubai's economic diversification plan is increasing local demand for industrial space, despite a slowdown within the property segment

Tech growth is driving industrial property demand in Dubai [representational image].
Tech growth is driving industrial property demand in Dubai [representational image].

The growth of Dubai's technology sector amid its economic diversification effort is driving up demand for industrial space in the city, a study has found. 

However, despite new space requirements, demand has "eased during 2017, exacerbated at present by the seasonal summer slowdown, with enquiry levels noticeably lower than at the start of the year", property consultancy Cluttons said. 

In its bi-annual Dubai Industrial Market Bulletin for Summer 2017, Cluttons found that "the persistence of an unstable global economic outlook, which has caused requirement levels to ebb across the city, a growing amount of speculatively developed warehouse space and increased competition amongst landlords, have all contributed to the increasingly stagnant conditions". 

Nevertheless, headline rents across all monitored areas have "largely held steady". 

In a press statement, Cluttons added: "In the secondary market, however, rental rates at Dubai Investments Park (DIP), Dubai Industrial Park, and Dubai South have fallen by between 4% and 12% over the last 12 months."

Companies such as Noon.com – which is set to open a 195,000m2 centre in Dubai South – and Amazon are leading the drive for increased industrial property options in the city. 

Moreover, tech giant Siemens will establish a logistics and distribution hub at the site of Expo 2020 Dubai. 

These factors are expected to continue increasing demand for industrial property in Dubai, even as rents face reductions driven by price corrections amid the secondary stock market, Murray Stang, head of Cluttons Dubai, said. 

He added: "Looking ahead to the second half of the year, we expect the strengthening pipeline of speculatively developed space to put rents under pressure, with more secondary stock likely to face sharper corrections as activity levels are expected to remain subdued.

"Landlords are expected to lower rents to entice relocation activity and we expect occupiers to capitalise on this.

"With that in mind, we expect rents to dip on average by up to 5% between now and the end of the year, before there is the potential for increased stability as the Expo 2020 economic boost starts to materialise in early 2018.”

In addition, the emergence of online businesses is also expected to drive up demand for industrial real estate, according to Faisal Durrani, head of research at Cluttons. 

He explained: "Dubai continues to move forward with its ambitious diversification plans, which has led to the emergence of new innovative businesses as well as the expansion of global players into the local market.

"Online retail businesses, for instance, are relatively new to the region and will require distribution centres and other logistics facilities.

"We expect to see growing demand from this sector as it develops, particularly around Al Maktoum International Airport and the Expo 2020 site, where the majority of demand is currently centred for industrial space."

 

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