Dubai’s industrial and logistics sectors witnessed a healthy growth in the first quarter (Q1) of the year, with a steady demand from new businesses entering the market and renewed confidence amongst existing players, a report said.

Rental prices saw a modest growth over the past six months, especially outside free zone areas, where building supply is limited, added the Q1 market report released by Cluttons, a real estate specialist.

In these areas, there is a trend for tenants to take up large pieces of land and build their own units, the report said.

Activity is currently concentrated in two main non-free zone areas, Dubai Industrial City (DI) and Dubai Investment Park (DIP). Dubai Industrial City is generating momentum and has reported occupancy figures of over 80 per cent for seven million square feet of warehousing and leasing figures of 9.8 million sq ft of land plots in Q1 2013.

The majority of demand has been driven from the automotive, base metal and food sectors.  

Dubai Investment Park has maintained its popularity, registering an increase of over 80 per cent in commercial space allotments over a total leased area of 1.6 million sq ft over the past six months.

Cluttons noted that several 32,000 to 86,000 sq ft warehouses being developed that have been sold and leased off-plan.

A key driver for the area has been the success of long-term leasehold interests with investors and occupiers, which are being offered for up to 85 years. This movement is expected to contribute to the expansion of Dubai Investment Park throughout 2013 and beyond, said the report.

Supply and demand in the free zone market has remained steady and this will most likely continue throughout 2013. In 2012, Jebel Ali Free Zone (Jafza) witnessed continued growth in the number of new company registrations, with over 450 new companies joining the zone. This is an impressive increase of 26 per cent on the previous year.

Capital values for prime warehouse facilities in JAFZA have remained stable, being between Dh170 ($46.2) to 200 per sq ft and sub-lease rents commanding Dh22 to 30 per sq ft per annum.

Dubai World Central (DWC) has also seen steady demand for facilities and plots and could see a further increase in demand, with reports that cargo volumes increased in 2012 by over 140 per cent, when compared with volumes from 2011, said the report.

Looking forward, Cluttons believes that this healthy demand will continue throughout the sector in Dubai.

As a result, the majority of the larger (32,000 sq ft and above), stand-alone, modern facilities could be absorbed.

According to Cluttons, we could see gentle rental and capital growth for these types of buildings as well as an increased demand for build-to-suit projects.

The Dubai industrial and logistics sector clearly has improved, and will continue to improve as demonstrated by strong rents. – TradeArabia News Service