Dubai Silk Road will drive demand for industrial and logistics space

A new report from Savills claims the Dubai Silk Road project will become a key driver of industrial real estate demand in the years ahead
Warehouse, Industrial, Logistics, Savills, Dubai

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While there is currently more supply than demand for property in the Dubai industrial and warehousing markets, the Silk Road strategy and an increase in firms from e-commerce, manufacturing and 3PL sectors are likely to drive demand through the second half of the year, says Savills.

In its Dubai Industrial Market H1 report, Savills says rents for these properties have dropped during the first half of the year. Grade A property rents dropped between 4% to 6% across the city, and Grade B rental values fell 8% to 10%.

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According to Savills report, Dubai has gone through a physical transformation as local economies become consumers rather than just being a point through which goods are transported and as such the local market is changing the demands of the supply chain and logistics processes.

At the recent Warehouse Summit Mena, National Association of Freight & Logistics President, Nadia Abdul Aziz noted that the UAE market was currently the third strongest logistics market in the world and the regional leader.

To maintain its robust global position, the Savills report predicts that Dubai Silk Road strategy, will play a strong role in spiking demand for warehousing and industrial space in the city, especially among Chinese investors.

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It focuses on enhancing trade between free zones, the Emirates, and connecting logistics services including between DP World locations across the world.

James Lynch, the head of industrial and logistics at Savills Dubai, said: "Demand in the industrial and warehousing sectors has been subdued in the first half of 2019. The transactions we have seen are towards spaces that have been built-to-suit and a 'flight to quality' as organisations seek operational efficiencies through improved facilities."

"Landlords are increasingly flexible, so there are good opportunities available for those pursuing space upgrades," stated Lynch.

"The positive news is that we are predicting government initiatives, such as the Dubai Silk Road, will create uplift in demand, while private sector growth in the ecommerce and 3PL sectors can also boost performance in the second half of this year," he added.

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