Dubai Warehouse Dilemma: Fierce Demand Strains Supply, Affects Businesses’ Expansion Plans

Dubai Warehouse Dilemma: Dubai grapples with a warehouse space crunch amidst a surge in business ventures and expanding corporate operations, notes a recent Knight Frank report. The third-quarter review underscores a stark demand-supply imbalance, with the under-construction warehouse stock at a mere 1.56 million square feet. Occupiers are now considering secondary stock or exploring options in Abu Dhabi, witnessing spillover demand.

In Abu Dhabi, rents remain stable, particularly in KEZAD and Masdar, while ADAFZ experiences a spike in demand, offering space at $163 (AED600) per square meter. ADAFZ is responding to escalating demand by developing a six-square-kilometer masterplan, Al Falah Free Zone, encompassing bonded and non-bonded zones.

Dubai saw 9.9 million square feet of new requirements between Q1 and Q3 of 2023, dominated by the logistics sector (44%), followed by manufacturing & industry (16%), and the technology sector (13%). In Abu Dhabi, industrial and logistics space requirements surged to 350,000 square meters, marking a significant 94% increase compared to the same period in 2022.


Dubai Warehouse Dilemma

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Maxim Talmatchi, Knight Frank’s Associate Partner and Co-Head of Industrial and Logistics, highlights the strong demand, attracting market entrants from Asia Pacific, CIS countries, Turkey, and India. The surge prompted local and international developers to explore Grade A logistics build-to-rent opportunities, with a forecast of delivering 9 to 10 million square feet in the next decade.

While Dubai’s warehouse lease rates remained steady in H2 2023, Grade B rents in JAFZA and Dubai Industrial City increased by 25% and 19%, respectively, compared to the same period last year. Al Quoz (Grade A) witnessed a 52% rent increase above January 2020 levels, making it the priciest warehouse leasing location in Dubai. Faisal Durrani, Partner and Head of Research—MENA, anticipates further rent hikes due to the transition of stock from warehousing to retail in this core location.

Despite institutional investments from the US and e-commerce growth, Dubai faces a shortage of prime industrial and logistics land. The report projects a continued upward trajectory for Dubai’s industrial rents driven by a supply shortage, combined with ambitious economic agendas and strategies. However, risks loom, with investor demand outpacing lease rates, compressing yields. Interest rate hikes could further dampen demand, potentially reversing yield compression by the end of 2023.

Our Reader’s Queries

Which is the best place for warehouse in Dubai?

Al Quoz is the go-to destination for those seeking industrial and commercial warehouses for rent in Dubai. As one of the city’s oldest and largest industrial zones, it’s no surprise that it’s a popular choice. Its central location and easy access to major highways, such as Sheikh Zayed Road, make it a convenient option for businesses.

How to start a warehouse business in Dubai?

Follow these simple steps to establish your business in Dubai’s warehousing industry. Begin by conducting thorough market research to gain a comprehensive understanding of the landscape. Next, define your business operations and select a suitable business name and economic zone. Register your trade name and submit your license application along with the required fee payment. Apply for your visa and open a bank account to facilitate your operations. Finally, operationalize your business and provide continuous support to ensure its success.

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