Demand for industrial and warehousing space witnessed a strong increase during the second half of the year. After a prolonged period of subdued demand levels, which was carried through from 2018, market activity improved on the back of a spike in renewal, relocation and consolidation exercise. The entry of a number of international companies, especially in the engineering and manufacturing sector, and expansion activity by 3PL (Third Party Logistics) and e-Commerce companies were other factors that led to a strong increase in demand when compared to H1 2019. Most of these transactions were under discussion for the last few quarters and were concluded during H2 2019, supported by various proactive measures implemented by the Government such as reducing fees for business incorporation and relaxing FDI norms, among others.

A healthy mix of small, medium and large sized transactions were observed across most micro-markets. Bulk of the demand was concentrated across locations such as Dubai South, Jebel Ali Free zone Authority (JAFZA), Dubai Investment Park (DIP) and National Industries Park (NIP). Demand drivers across these micro-markets varied depending on factors such as the nature of the business and warehousing specifications. The emergence of new concepts such as ‘cloud kitchens’ and ‘vertical farming’ has also had a positive impact on warehousing demand in the city.

Occupiers from the F&B sector (Food and Beverage - cloud kitchen operators) and select 3PL companies that service the domestic market, continue to display a preference for Al Quoz due to its central location. Dubai South on the other hand emerged as the preferred location for e-Commerce companies and 3PL players due to the availability of international quality stock, proximity to port and airways and easy access through major road

networks. During H2 2019, close to 350,000 sq. ft. of warehousing space was leased across Dubai South by government entities (related to Expo 2020), international e-commerce companies and automotive spare part manufacturers among other firms. Over 750,000 sq. ft. of land was also leased on a long-term basis across Dubai South, making it one of the most active industrial and warehousing markets during H2 2019. DIP and JAFZA were among the other key markets to witness strong demand during the review period. Various small-to-medium size transaction closures were observed across these locations. Savills transacted deals in DIP (approximately 200,000 sq. ft) constituted 70% of new lease transactions and 30% renewals. Across JAFZA, leasing activity remained strong due to the flexibility and availability of good quality space.

A few of the key transactions that were concluded during the year included, the approximately 52,000 sq. ft. facility by DHL and a bonded warehousing facility by Kerry Logistics around Dubai World Central (DWC), a new warehouse at Jebel Ali by Jereh (oil & gas solutions provider) and space take-up by Maanshan Iron and Steel Company (Masteel) at JAFZA.

Demand for built-to-suit warehousing space was strong across the National Industries Park (NIP). The micro-market has witnessed a growing interest from companies keen on onshore activity. The availability of land parcels for future expansion, better quality of existing stock and proximity to the port were among the major factors contributing to the strong demand levels across NIP.

A gradual shift towards better quality of stock was observed during H2 2019 as well. Below is a typical specification of Grade A stock that has been in demand from occupiers.

Dubai Industrial MarketUAE Commercial – H2 2019

Strong increase in demand observed during the second half

Out of the 12 key warehousing and industrial

micro-markets in Dubai, rental correction was

observed across only five micro-markets when compared to H1 2019

A healthy mix of small, medium and large sized

transactions were observed across micro-markets

Entry of a number of international companies,

especially in the engineering and manufacturing sector, and

expansion activity by 3PL (Third Party Logistics) and

e-Commerce companies were observed

A gradual shift towards better quality of stock

continued during H2 2019

MARKETIN

MINUTES

Savills Research

Dubai Industrial Market - H2 2019

Grade A

Grade B

Dubai Industrial Market Rents H2 2019

Source Savills Research

Out of the 12 key warehousing and industrial micro-markets in Dubai, rental correction was observed across only five locations when compared to H1 2019 data. Rental decline was more prominent across Grade B stock where prices have corrected by an average 10% – 12% on a half yearly basis. The current quoted rental values are provided in the below table.

Light Industrial Units (sq. ft.)

Eaves Height (meters)

Power Load (KW)

Number of Loading

Type of Loading

Up to 5,000 Over 8 Over 50 2+ Loading Bay

5,000 - 9,999 Over 8 Over 100 2+ Loading Bay

10,000 - 19,999 Over 10 Over 200 4+ Sunken Dock orLoading Bay

20,000 - 49,999 Over 12 Over 400 4+ Sunken Dock orDock Loading

50,000 - 100,000 Over 14 Over 600 6+ Sunken Dock orDock Loading

0 10 20 30 40

AED / sq.ft. / Annum

50 60 70 80

DAFZA

Ras Al Khor

Dubai Silicon Oasis

Dubiotech

National Industries Park

Jebel Ali Industrial

Al Quoz

Dubai South

Dubai Industrial Park

Dubai Investment Park

JAFZA

Dubai Industrial Market - H2 2019

Key Transactions H2 2019

Micro-market Tenant Sector License Type Warehouse Area Leased (sq. ft.)

Transacted Rent(AED / sq. ft. / annum)

Dubai SouthEngineering and Manufacturing (Automobile)

Offshore Ambient Warehouse 8,000 - 10,000 60

Dubai South e-Commerce OffshoreTemperature

Controlled Warehouse

65,000 - 70,000 34

DIP 3PL OnshoreTemperature

Controlled Warehouse

24,000 - 28,000 25

DIP Engineering and Manufacturing Onshore Ambient Warehouse 5,000 - 7,000 22

JAFZA Engineering and Manufacturing Offshore Ambient Warehouse 50,000 - 55,000 30

*Due to the confidential nature of the transactions a size range has been provided

Going forward, landlords are anticipated to remain flexible around lease terms and rental rates. This will continue to support demand for good quality stock in the city. Demand is likely to remain strong from existing sectors and emerging industries. Among others, the e-commerce is likely to remain as one of the top three sectors driving demand for warehousing space in the city. Online sales is still at a very nascent stage with less than 5% share of the total retail sales, compared to 12 – 15% in counties such as the United Kingdom and the United States. However, since the internet penetration (at 91%) in the UAE is the highest in the region, coupled with a high share of young and educated population, the e-commerce sector is poised for growth. This will support the long-term growth of institutional grade modern warehousing stock in the city. There is also a renewed focus on sustainable development across the warehousing sector. Few regional retail operators and warehouse developers have incorporated renewable energy and other sustainable practices into their warehousing. We anticipate this trend to continue and grow considerably in line with Dubai’s vision and focus on sustainable developments.

Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 700 offices and associates throughout the Americas, the UK, continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

Swapnil PillaiAssociate - Research+971 (0) 4 365 7724swapnil.pillai@savills.me

Luke TippCommercial Agent+971 (0) 4 365 7728luke.tipp@savills.me

Murray StrangHead of Savills Dubai+971 (0) 4 365 7741murray.strang@savills.me

Please contact us for further information

Savills team

Source Savills Research* Map is for representation purpose only

Dubai Industrial Market - H2 2019

DAFZA

RAS AL KHOR 8.3%

NATIONAL INDUSTRIES PARK

DUBAI SILICON OASIS

DUBAI INDUSTRIAL PARK 13.3%

AL QUOZ 12.5%

JEBEL ALI INDUSTRIAL

JAFZA

DUBAI INVESTMENT PARK 16.7%

DUBAI SOUTH 7.0%

DUBIOTECH

UP

STABLE

DOWN

HALF-YEARLY CHANGE (%)

Paula WalsheDirector - InternationalCorporate Services+971 (0) 4 365 7731paula.walshe@savills.me