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Technology in commercial real estate

Technology is pushing change in space use, locations and demand levels

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A shift in shopping habits is driving demand for smaller formats of retail stores
Property Weekly

Technology’s impact on the UAE’s real estate market and economy extends far beyond modern, trendy offices housing tech firms. With increasing numbers of consumers turning to e-commerce, more consumer goods may be found in UAE warehouses than in retail stores in the future. The UAE has been lagging the rest of the world where e-commerce has been 2.6 per cent of total retail sales versus 7 per cent globally in 2015, according to Chalhoub Group’s 2017 Luxury White Paper.

“Dubai Chamber of Commerce has stated that the value of Dubai’s retail sector is expected to be $71 billion (Dh260.78 billion) by 2021 from $56.6 billion by end of 2016, growing at a compound annual growth rate (CAGR) of 4.9 per cent,” noted Charles Swanson, Knight Frank surveyor, commercial leasing. “According to estimates from 2015 by AT Kearney, GCC e-commerce sales could increase from $5.3 billion to $20 billion by 2020. The result of this shift in consumer shopping habits is a change in the commercial real estate environment, as we will see the need for more distribution depots and smaller formats of retail stores.”

According to Nour Suliman, CEO of DHL Express for the Middle East and North Africa, the change in consumer habits provides enormous opportunities for logistic companies. There are over 4 million online buyers in the region, and this is set to rapidly increase with an expanding population that is surpassing world average growth rates. There is also a predominantly young population, especially in GCC countries which are more tech-savvy and prone to online purchases.

A pan-Arab government body is preparing to release a five-year strategy it claims will help grow the region’s e-commerce sector to $200 billion beyond 2020.

As the demand for warehouse increases, warehouses are being built with larger footprints and higher clearance heights than ever before. In fact, the average size of new warehouses has been increasing. Many retail/industrial occupiers are now conducting multiple operations under one roof, such as brick and mortar store inventory replenishment and online sales fulfilment.

Logistics companies have also been experimenting with drone delivery of goods, which has proved successful in remote areas. For example, in Rwanda UPS has successfully been operating a fleet of drones delivering key medical supplies and blood to pregnant women suffering from post-partum haemorrhaging. This enables supplies to reach remote areas in less than 30 minutes, saving countless lives.

Dubai’s workforce is young by global demographic standards, with an average working age of 25 to 35. The population of people aged 15-29 years old has grown by 7 per cent from 2000-15 and for Dubai to attract international young talent, it will need to remain competitive with its global peers such as London and New York, which have emerged as tech hubs.

No form of real estate is exempt from the exponential expansion of technology. Technology is pushing change in space use, locations and demand levels at an accelerated pace.

Source: Knight Frank

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