Dubai: With an economy on the mend and trade flows recording consistently high growth, industrial and logistics real estate in the UAE is becoming a must have asset for investors. The industrial zones in Dubai are getting a lot of this investor interest and so are choice locations in Abu Dhabi.

Investor demand for such properties is broad-based – “Interest is not just originating from the UAE but across the GCC with investors looking for stable assets such as logistics premises,” said Andrew Powell, surveyor for industrial and logistics at Cluttons. “Demand has led to a hardening of yields and higher asking values, but this is coupled with the limited supply of good quality assets of this nature.”

On the supply side there will be more emerging out of the pipeline in the near to medium term. Additional areas within Dubai Investments Park (DIP) were designated as long-term leasehold – of up to 85 years - through a recent decree, and this will be used principally for new industrial properties.

The new leasehold regulation is applicable across all the zones in DIP, including residential, commercial and industrial. The move will allow existing tenants in lease brackets spanning from 30 to 60 years to acquire additional property for more than 80 years.

“With the economic and political turmoil seeing a gradual end in this region, we hope to be the first choice for investors seeking to set up shop on secure and self-contained premises in Dubai,” said Omar Mesmar, general manager, DIP.

DIP had a take-up of more than 300,000 square metres in the year to date, according to a recent Cluttons note, while Dubai Industrial City – with 10 million square feet - has done 75 per cent occupancy.

Recently, Dubai World Central – the emirate’s all-encompassing logistics hub in the making – received a major boost with the Swiss multinational Nestle taking a 175,000 square metre plot there.

The emphasis is on quality stock, which could fetch leases of up to Dh30 a square foot. “Values for quality stock will remain range-bound,” said Powell. “However, should further units be released that do not meet the higher specifications and demands of international operators, then this will affect the market and values will slip as there is already an oversupply of poor quality stock.

“Another risk is if further land is allocated to the sector too fast, then growth will be restricted by constant top up supply.”

Other market sources agree that a sharp firming up of values within the industrial real estate space may not come to pass. “While there has been more interest of late, I don’t believe prices have firmed up much as there is a supply glut of both warehouses and labour camps,” said Manish Khatri, partner at SPF Realty. “These assets are mostly of interest to UAE-based companies for their operations and not overseas investors. But Dubai’s decision not to allow companies to put up labour in other emirates is not helping.”

Taken from another perspective, that would work to the advantage of Dubai’s industrial clusters.