FOCUS: Industrial and logistics real estate top in 2015
Boeing and IKEA were two of the biggest names to recently announce a major investment in Dubai South’s industrial and logistics hub and both have benefited from areas such as this holding their value better than any other property sectors during the current period of uncertainty.
“Industrial land sale prices grew marginally in older areas due to the shortage of supply, while newer areas were able to maintain their prices owing to the infrastructure and locational advantages they offer,” a new report issued by the consultancy Core Savills says. “Industrial zone rental rates were broadly stable across most of the older locations with the newer areas — Dubai South, DIP (Dubai Investments Park) and DIC (Dubai Industrial City) showing marginal growth.”
The master-developers of these new logistics and industrial hubs while not likely to be happy with the “marginal” gains, will nonetheless take them in their stride as it assures their investors and tenants relative stability on costs in the medium-term.
The upturn is holding up even for the older industrial and warehousing clusters such as Al Quoz, Al Ghusais and Ras Al Khor. These centres, according to the report, are at “almost full occupancy and have maintained higher rental rates as a result of shortage in supply”.
“The lack of available space in these areas has led many existing occupiers to consolidate their businesses where possible, but they are increasingly exploring options in new locations,” the report notes. “However, the established businesses are generally preferring to remain where they are due to their desire to minimise capital expenditure and the convenience of faster delivery times facilitated by their central locations.”
A similar focus is visible in Abu Dhabi, where Kizad has been successful in drawing major investments from tenants and Sharjah’s ambitious Al Sajaa Industrial Oasis, a project that aims to draw new investors apart from the many existing factories located within the city limits, has seen significant growth after slots were opened last October.
Some of the master-developers are now exporting the concept to other Gulf markets, hoping to mimic their success. Dubai Investments has entered a joint venture to develop a free zone in Riyadh. It has, in the past, also expressed interest in possible projects in Africa on build-operate-transfer models.
The Core Savills report expects Dubai’s industrial and logistics hubs to continue their strong performance this year.
“Despite the context of regional economic uncertainty, the outlook for 2016 is likely to continue to be relatively strong. Unparalleled connectivity, stable rental rates, a significant pipeline of available land and built space, the ability to build high quality, high specification supply on competitive timelines together with ¬flexible lease terms are likely to ensure that Dubai continues to dominate the regional logistics and industrial sectors,” says the report.
Comparing the industrial and logistics hubs:
• Jebel Ali Free Zone last year issued more than 600 new licences, 120 for new manufacturing and logistics occupiers, according to Core Savills. “Almost 70 per cent per cent of new occupiers were overseas entrants and this growth supported Jafza’s high occupancy levels, whilst retaining a further 15 square kilometres of land near the airport for future expansion.”
• Jebel Ali Industrial Area: offers supply in all formats and sizes such as manufacturing, warehousing and land plots, but with limited Grade A and predominantly grade B built quality.
• Dubai Investments Park: “promoted industrial activity by virtue of its land lease rentals being lower for purely industrial land leases compared to warehousing land leases,” explains the report. Nearly 90 per cent of DIP’s land is already leased. According to the report, rental prices were supported by “robust rental movement in its subletting market with approximately 2.4 million square feet of built-up being transacted by close to 200 companies in 2015”.
• Dubai Industrial City: with more than 70 per cent of its 55 square kilometre master plan dedicated to manufacturing, utilities and infrastructure, Dubai Industrial City benefited from 45 new occupiers taking space in 2015. As a result, DIC has reported its highest activity levels since inception (2004) over the last two years, according to the report.
• Dubai South: Set at the end of a dedicated logistics corridor linked with Jebel Ali port to the northwest forming “a multi-modal, single customs bonded free zone that enables a sea — air turnaround in under four hours,” Dubai South’s “connectivity has propelled it to the forefront of warehousing activity with third party logistics occupiers taking up new space and existing tenants expanding.”