Dubai: Even the industrial real estate in Dubai is not immune to a softening in market dynamics. Potential occupiers are becoming demanding in their search for preferential lease rates, and typically lower than the current market average.
Rental declines are now averaging 7 per cent across the market, according to an update from CBRE.
“Due to market conditions, landlords are now more willing to drop rentals and increase incentives, including rent-free periods, in order to attract potential tenants,” said Matt Green, head of Research-UAE at CBRE. “With the economic environment likely to remain weak in the short term, we anticipate a further evolution of a tenant-led market.”
But there are variations in how each location is faring.
“While all tracked locations have seen rentals decline or remain flat over the past year, Class 1 industrial assets have generally been the most resilient, recording less than 5 per cent rental reductions over the period,” the report notes. “This trend is set to continue in the short-term at least, with limited new quality supply expected.”
The Jafza sub-market saw no material change in rentals over the past year, and helped by high occupancy rates for warehouses and light industrial units in the primary market, with “only 7-10 per cent currently vacant”, the report says. “The bulk of these are utilised as occupier incubator facilities, before transitioning to purpose-built facilities. “However, Jafza’s active secondary market has witnessed an increase in the number of properties available for sub-lease and sale, leading to a decline in capital values over the last 12 months, with rates now equating to around Dh2,153-Dh2,691 a square metre for Class 1 industrial assets.”
Where possible, occupiers are seeking chances to relocate to newer facilities with lower rentals and road connectivity. Such migrations are happening from non-free zone industrial areas such as Umm Ramool, Al Quoz and Ras Al Khor to Dubai Investment Park and Dubai Industrial Park.
“Capital values in the development are now in the range of Dh4,000–Dh4,500 a square metre,” CBRE reports.
