UAE Warehouses Near Full Occupancy as Dubai Industrial Rents Rise 5.9%, JLL Says

The report suggests the regional war has pushed up demand for UAE warehouses rather than cutting it. According to JLL, businesses have been rethinking their supply chains. They are holding more safety stock and putting more freight on overland routes they consider more reliable, and both changes need extra storage and logistics space. Expansion by international and regional logistics and e-commerce companies has also supported the market.

In Dubai, new industrial leases rose 25.7% from a year earlier. Renewals fell 8.9% in the quarter because some tenants moved to new or better facilities, though JLL said the number of renewed contracts was still 9.5% higher than in the same period last year. Average Dubai industrial rents reached AED50 per square foot, up 5.9% on the year, which the report put down to a shortage of modern warehouses and continued demand for advanced logistics buildings.

Abu Dhabi rents rose more slowly. They averaged AED489 per square metre, up 1.6% year on year and 0.6% from the previous quarter. JLL said rules limiting rent increases explain the slower growth. Some properties and new developments are exempt from those rules, and demand and occupancy in the capital's prime industrial zones stayed strong.

The report pointed to several Abu Dhabi projects aimed at more specialised demand. KEZAD Group and Jingdong Property, part of JD.com, have agreed to develop 150,000 square metres of automated warehousing. Axione is building a 37,000-square-metre cold-chain hub at Abu Dhabi Food Hub, and KEZAD Logistics Park 7 will add 88,135 square metres of logistics space.

Abhishek Mittal, JLL's head of industrial for the Middle East and Africa, said the kind of demand changed during the quarter. New companies entered the UAE, and existing occupiers moved into better facilities while redesigning their supply chains to cope with disruption. He said multimodal links being built across the region, including the AD Ports Group-Etihad Rail bonded corridor, should speed up overland transport across the GCC over the longer term.

The figures fit other signs that Gulf trade is moving away from sea routes. AD Ports said this week that container volumes at its UAE terminals fell 57% in the third quarter, even as its shipping and logistics businesses lifted revenue. Warehouse users, meanwhile, appear to be storing more goods inland.

Relief on supply is not guaranteed. JLL expects new Grade A warehouse projects to ease the shortage, but it said higher construction costs could delay the completion of some of them, which would leave tenants with little choice and keep upward pressure on Dubai rents.