You are on page 1of 4

research

H1 2011

dubai logistics & industrial


Market update

Highlights
W  ithin the established logistics locations we have witnessed the emergence of a two tier market over the last 12 months. H  igher quality warehousing accommodation is now achieving rents of circa 30-45% greater than the lower quality neighbouring storage accommodation. T  he logistics and light industrial sector has received a renewed interest from international investment funds looking to develop higher grade stock and to invest in good quality existing assets. D  ubai Investments Park (DIP) have begun works on the latest phase of light industrial units and is already receiving pre-let interest from occupiers. D  ubai Industrial City has made moves to attract inward investment in industrial land plots by reducing land rents from AED 3 per sq ft to AED 1 per sq ft (AED 32 per sq m to AED 10.8 per sq m).

H1 2011

dubai logistics & Industrial


Market update

Market comment
D  emand for European quality logistics and distribution accommodation increases as internationally known design and build contractors look to build on behalf of owner occupier and investor landlords. R  ental values fall in mature logistics areas such as Jebel Ali Free Zone (JAFZA) and Dubai Investments Park (DIP) as better quality medium to large units begin to be absorbed by new occupiers. Rental values of smaller light industrial units in Dubai Investments Park (DIP) and Al Quoz continue to fall as supply continues to out strip demand. I nstitutionally recognised investment deals that were completed on the CEVA properties in JAFZA are yet to be repeated. The recent entry of several international specialist industrial developers feeds speculation that similar transactions are on the horizon. O  ver the past 12 months rental values have weakened, which has softened the capital values being achieved. F  urther third party progress on Dubai World Central (DWC) will be carefully watched as ARAMEX have recently opened their 420,000 sq ft facility.
Figure 1

Figure 2

Key market indicators


Class 1 JAFZA Rents Trending 32 per sq ft

Class 1 Dubai 25 per sq ft Investments Park (DIP) Average size requirement Average rent free inducement
Source: Knight Frank

4 4 4 5

20,001- 50,000 sq ft 6 months

Figure 3

Developed industrial land in Dubai


300 250 Millions sq m 200 150 100 50 Al Khubaisi Umm-Ramool Al Quoz Al Qusais Ras Al Khor Jebel Ali Free Zone (North JAFZA) Jebel Ali Free Zone (South JAFZA) Jebel Ali Industrial Area Dubai Investments Park (DIP) Dubai Industrial City (DIC) Dubai Airport Free Zone (DAFZA) Techno Park Dubai Maritime City (DMC) Al Quoz Dubai JAFZA Investments Park (DIP) Class 1 Source: Knight Frank Class 2 Dubai Maritime City (DMC) 0

Dubai class 1 industrial rents (2007-2011)


80 70 Price per sq ft 60 50 40 30 20 10 Q3 Q4 2007 Q1 Q2 Q3 2008 Al Quoz Q4 Q1 Q2 Q3 2009 Q4 Q1 Q2 Q3 2010 JAFZA Q4 Q1 Q2 2011

Dubai Investments Park (DIP)

Source: Knight Frank

Source: Knight Frank

Figure 4

Dubai industrial rents Q3 2011


Modern European specifications still continue to achieve rents above AED 35 per sq ft

40 35
AED / sq ft per annum

30 25 20 15 10 5 0

MARKET VIEW
R  ental rates for poor quality speculatively built Light Industrial Units has fallen to AED 17 per sq ft in Dubai Investments Park (DIP) and Al Quoz. R  equirements for 20,000-40,000 sq ft facilities in JAZFA remain strong as stock with suitable site coverage is scarce. L  andlords are becoming more flexible with lease terms and are offering rent free inducements to incentivise incoming occupiers. L  andlords are more willing to pay the municipality and authority fees on sub leases which are equivalent to 15-30% of the occupational rent, depending on location.

KnightFrank.ae

THE WORLD

N
PALM JEBEL ALI

THE PALM JUMEIRAH

TO ABU DHABI
Sh iek hZ

Dubai Maritime City


ed Ro ad

ay

Jebel Ali Port


11
M M M

Port Rashid
M M M M M M M M M M M M M M M M M M M M

Dubai Marina
M M M M M M M M M M

Burj Al Arab

Emir

ates

Techno Park
Roa dE 311

JAFZA
JAFZA (South Zone)

Shiekh Zayed Road E11


M M M M M M

TO SHARJAH

Jebel Ali Industrial Area

Al Quoz Industrial Area

Burj Khalifa

Emirate Towers

Al Jadaf

M M

E6

Dubai Industrial City

Dubai Logistics City

Dubai Aviation City


0 10KM

(under construction)

AL MAKTOUM AIRPORT

Emirates Ro

ad E311

Dubai Bypa

Al Ain

Road

Dubai Investments Park

Ras Al Khor

Umm Ramool DUBAI INTERNATIONAL


M

DAFZA

M M

Al Qusais

ss Road E6

11

KEY
Onshore Zones Free Zone Free Zones / Onshore

Al A wir

TO AL AIN
Le ba b Ro

Silicon Oasis

Roa d E44

Map is for indicative purposes only Approximate scale

TO HATTA

Metro Line

Table 1

Figure 6

Geographic locations of focus



Industrial property demand by sector

ad E7 7

TO RAS AL KHAYMAH

Figure 7

Size requirement (sq ft) in H1 2011

Age

Al Quoz 1973 Dubai 1997 Investments Park (DIP) JAFZA 1985 Jebel Ali Ind 1995 Ras Al Khor 1976 Dubai Maritime City (DMC)
Figure 5

(sq km)

Size Developed Status 27 32 95% On shore 75% On shore

56 22 12 2.27

75% Free zone 60% On shore 95% On shore 70% Free zone

2007

FMGC

19% 13% 25% 13% 31%

Under 20,000 20,001 -50,000 50,001-100,000 100,001+ Source: Knight Frank

27% 33% 13% 27%

Dubai ground rents Q3 2011


10 8 6 4 2 0

Pharmaceutical F&B 3pl General storage Source: Knight Frank

AED / sq ft per annum

MARKET VIEW
T  here is a continued flight to quality as higher quality units become more affordable and owner occupiers explore the design and build route, leaving the lower end of the market with high vacancies.
Al Quoz Dubai Jebel Ali JAFZA Dubai Maritime Investments City (DMC) Park (DIP) Range

C  ontinued interest is expected in the logistics and light industrial sector as competition for investment grade stock gains momentum. A  bsorption rates will remain flat as occupiers (such as food distributors) look to relocate and consolidate rather than embark on expansion plans.

Source: Knight Frank

RESEARCH

Americas USA Bermuda Brazil Canada Caribbean Chile Australasia Australia New Zealand Europe UK Belgium Czech Republic France Germany Hungary Ireland Italy Monaco Poland Portugal Romania Russia Spain The Netherlands Ukrai ne Africa Botswana Kenya Malawi Nigeria South Africa Tanzania Uganda Zambia Zimbabwe Asia Cambodia China Hong Kong India Indonesia Macau Malaysia Singapore Thailand Vietnam The Gulf Abu Dhabi, UAE Bahrain Dubai, UAE

Abu Dhabi Office P.O. Box 3520 Plot C 210, East 4/2 Al Muroor Street Abu Dhabi United Arab Emirates T: +971 (0) 2659 4994 F: +971 (0) 2635 5384 Leasing Edward Batten Commercial Leasing Manager D: +971 (0) 4451 2000 M: +971 (0) 5678 34559 edward.batten@me.knightfrank.com Euan Kelly Commercial Leasing Surveyor D: +971 (0) 4451 2000 M: +971 (0) 5081 58370 euan.kelly@me.knightfrank.com Tariq Al Badri Business Development Officer D: +971 (0) 4451 2000 tariq.albadri@nbad.com

Dubai Office P.O. Box 127999 Unit 611, 6th Floor Building No.4 Emaar Business Park Dubai United Arab Emirates T: +971 (0) 4451 2000

Valuation & Professional Services Stephen Flanagan Director of Professional Services D: +971 (0) 2658 8685 M: +971 (0) 5088 133402 stephen.flanagan@me.knightfrank.com Investment & Fund Advisory Joseph Morris Associate Director D: +971 (0) 2635 3286 M: +971 (0) 5050 36351 joseph.morris@me.knightfrank.com

Technical Note W  arehouse accommodation has been sub-divided into Class 1 and Class 2, reflecting high and low quality respectively. Whilst subjective, this categorisation is based on an assessment of each propertys age, specification, quality of build, location, situation, site coverage and operational efficiency. E  uropean specification and quality although subjective indicates that the building is consistent with what has become the institutionally acceptable investment standard for logistics and warehouse accommodation across Western Europe. Industry standard specifications would generally include raised dock entry set at approx. 1.3m, 1 dock per 10,000 sq ft of warehouse floor area, 2 level entry doors, 10% office content, 10m clear internal height, a site density not exceeding 50%, floor tolerances to allow free movement fork lift truck (FLT) operation according to height of building, temperature control, fully insulated external roofing and cladding system and a minimum 10 percent roof lights.

Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs. Knight Frank Research Reports are also available at KnightFrank.com/Research
Knight Frank LLP 2011 This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research. Knight Frank UAE Limited Abu Dhabi, is a foreign branch with registration number 1189910 Our registered office is: Plot C210, East 4/2, Al Muroor Street, Abu Dhabi, UAE, PO Box 3520