Cluttons: Q3 Dubai Industrial sector has a ‘reason to celebrate’ as activity increases month on mont

Cluttons, the real estate specialist that has enjoyed a dedicated Middle Eastern presence since 1976, today announces its latest Q3 market report for Dubai’s Industrial market as we move into the final quarter of 2011. Cluttons notes that the recent increase in activity gives the market a reason to celebrate, as a number of international light industrial and logistics occupiers have entered the market seeking higher quality units. This surge in demand is mainly being driven from courier companies and the GCC petrochemical industry, with requests being received from occupiers involved in the downstream oil and gas sectors. 

The report highlights that international occupiers continue to see Dubai as the ideal GCC location. Although such tenants often complain of sub-standard facilities, offered at overly high prices, the increase in demand serves to underline that Dubai is a key location for regional HQ’s. The limited supply of quality accommodation for sale within JAFZA is partly due to a high percentage of owner occupiers and the recent trend for speculative development. Land plots over 100,000 square feet between Dubai International Airport and Dubai Investment Part are in very short supply. 

In conjunction Cluttons have noted that good international specifications within Dubai buildings are proving to be elusive, with limited availability for properties greater than 50,000sq ft. As a result of the supply restrictions, pricing is still an issue and there is a gulf between what occupiers are willing to, and able to pay, and what vendors believe the properties are worth. This lack of quality is now seeing a new development trend of “build to suit” premises outside the freezones. However occupiers are seeing an increase in the pre- let rents, which have increased over the last 12 months from 30-32sq ft to around AED 35 sq ft. 

Finally, the report notes that the investment market remains strong with a number of funds seeking well- let modern buildings, with strong demand from several institutions and investment banks for logistic buildings. However the lack of investment grade stock means very few transactions have been completed and yields have hardened due to product not being available.