Despite the decline in oil prices and the uncertainty in the global economy and the GCC region, the UAE stands as a strong performer due to its positive efforts to diversify its economy. The UAE ranks as one of the fastest-growing economies in the region, registering build-up in sectors like metals, building materials, food and beverage, manufacturing and digital technologies.
The bold vision of the leaders of the UAE has helped to develop high-end manufacturing industries by offering them the right infrastructure that has played a crucial role in creating jobs for the rapidly expanding population. Dubai’s position as a global logistics and manufacturing hub is particularly aided by its locational advantages, its aviation and port infrastructure and supporting legislation. This has led to a demand for prime ready facility such as warehouses that translates into attractive opportunities for investors.
According to Knight Frank’s UAE Industrial and Logistics 2017 Insight Report, in Dubai there is a growing appetite for industrial property as an investment asset due to the attractive yield profiles and perceived resilience to adverse economic conditions. For investors, there are good opportunities largely in newer industrial areas such as Dubai Investments Park (DIP), Dubai South and Jebel Ali Free Zone Authority (Jafza) for purpose-built assets, pre-leased by high-profile tenants on long-term leases of 10-15 years, neutralising the inherent risk.
Here are a few reasons why investing in a warehouse represents the best alternative to the luxury market.
Versatility
A warehouse can be easily converted into a showroom or a retail space, or be used as an office space. Manufacturers can transform their warehouses into a production base for their goods, or to sell their inventories. A warehouse can have multiple purposes and can be modified according to needs.
Minimal risk investment
Considering the continuous demand for storage spaces, the volume of transactions related to warehouses has been on an upraise, while the rental price index has been maintained and accessible for both investors and companies, with prices ranging from Dh25 per square foot in secondary industrial areas to Dh35 per square foot in the industrial area of Jebel Ali. In principal areas, such as Al Quoz, the prices have been estimated somewhere between Dh50 and Dh55 per square foot and Dh65 and Dh77 per square foot in Dubai Silicon Oasis.
Meanwhile, Dubai South has emerged as one of the most sought-after locations, in line with the expansion of Al Maktoum International Airport, with prices from Dh60 per square foot.
New units
The Dubai warehousing sector recorded the entry of new units to the market last year, most of which were in Dubai South and Dubai Wholesale Trade City. The Dubai Industrial Park offered 70 new units of warehouses and warehouses for leasing within the 618 units already existing in the complex. Jafza completed the construction of 110 new warehouses, all located in the southern region.
In terms of occupancy, Jafza maintains the lowest percentage of vacant spaces, which does not exceed 5 per cent, followed by DIP, which recently welcomed more than 100 new companies, boosting the demand for storage spaces.
Multiple sectors
The food and beverage industry leads the demand for storage and warehouse spaces in Dubai. This sector witnessed a steady growth last year as a result of the population growth and the constant flow of tourists. The wholesale and retail trade sector follows as an increasing number of traders and investors have chosen Dubai because of the infrastructural benefits and government services available at all ports and airports.
Last but not least, the industrial sector is also creating new demand for storage and warehouses. The government pays great attention to this sector as it has been generating high demand for warehouses in various areas of Dubai.
Better ROI
As the demand for warehouses increases in Dubai, renting or buying a warehouse has turned out to be a major investment opportunity, with a guaranteed return on investment (ROI) of 8-10 per cent annually.
