Top 5: Why Dubai's logistics corridor is on the move
Written by Niall McLoughlin, senior vice president, DAMAC Properties.
Dubai’s logistics sector is literally booming. The emirate’s total direct trade increased 27 per cent in the first five months of the year according to figures released by the Dubai Chamber of Commerce and Industry.
The total value of exports and re-exports surged to over US$44 billion in the first eight months of the year, with the lion’s share of these goods passing through Dubai’s trade corridor which covers a massive area of approximately 200 square kilometres. It links sea, land and air, bridging the Jebel Ali Port – the sixth-largest container port in the world; Jebel Ali Free Zone – host to more than 6500 companies; and Dubai World Central – home to Al Maktoum International airport, which upon completion, will be the world’s largest airport.
So what does the surging logistics industry have to do with property? There are five main reasons why property in the logistics corridor is being swept up by the logistics freight train.
Firstly, logistics and trade are creating employment and that is stimulating demand for nearby housing. People will always want to live close to where they work. More than 200,000 people work at the Jebel Ali Port and of that number, currently about 80 per cent commute to work from elsewhere in Dubai, or the wider emirates. Recognising this strategic opportunity, DAMAC Properties is constructing two residential projects within the corridor; Suburbia in Downtown Jebel Ali; and Amber Residences close to Dubai’s new airport. We have observed a very strong correlation between the growth of Dubai’s logistics sector and interest from investors seeking to buy property within this growth area.
Secondly, there has been an influx of new SMEs that are purchasing residential property for expatriate employee accommodation. Last year alone, 480 new companies, including 55 multinationals, launched operations in Jebel Ali. Companies are drawn by the convenience of having all relevant services readily available to conduct their effective business operations. We have been selling entire floors to multinational businesses who are seeking to secure accommodation for their employees close to their regional headquarters.
Thirdly, property prices in Dubai are at an all time low, which means Dubai real estate now represents extraordinary value for money. While Maktoum Airport isn’t fully operational yet, it will be in the near future which will drive up demand for nearby real estate and inevitably push up prices. The aim of every property investor is to “buy low, sell high,” and right now is the ideal time to buy at the bottom of the market. Savvy investors know that in a few years when prices rise, they will realise an excellent return on their initial investment. The timing of buying a property can be just as important as the timing of selling. Buying at the lowest possible price can often be more lucrative in terms of capital gain than picking the exact right time to sell at the top of the market.
Fourthly, buying property in the logistics corridor is a good way of gaining exposure to Dubai’s logistics growth story. Logistics and trade is one of Dubai’s main economic growth engines and Jebel Ali is the heart and soul of logistics in Dubai. The potential for growth in the logistics sector is enormous and from that we are predicting there will be a flow on effect to demand for residential property within the logistics corridor. Sure, you can buy shares in DP World, but for investors who recognise the long-term growth prospects of Dubai’s logistics corridor, property is one of the best vehicles to leverage on the mid to long term outlook for the sector.
Finally, it’s a safe and secure tax-free investment. Investors who have accumulated significant holdings of cash assets can find excellent returns by investing that cash in property in Dubai. Fixed income assets such as bonds or term deposits are offering very low yields in most of the developed world. Investors can achieve a greater return on investment by allocating their money to real estate in Dubai, which is achieving rental yields of between 7 and 12 per cent for premium properties.
High rental yields, when compounded with the implications from investing in a tax free environment, makes the UAE a highly favourable, safe and secure investment destination. We are continually assessing and evaluating the macro-economic environment to provide property and investment solutions in rapidly changing markets. As a developer in the Middle East, we have a strong track record of selecting and developing the right properties in the right locations at the right time. Cities with greater logistics capabilities tend to attract more foreign direct investment. Dubai is on the move, which is creating an extraordinary opportunity for property investors to jump on board and enjoy the ride.