Dubai - Mubasher: The global economic anxiety and slowdown in growth regional markets has played a significant role in the falling demand for industrial real estate in Dubai, a newly-released report by Cluttons has said.
This in turn has led to capital value corrections in most of the emirate’s submarkets, the international real estate consultancy noted.
Activity in the sector has “curtailed”, despite being amongst the most resilient in the emirate over the past couple of years, Cluttons’ bi-annual Dubai Industrial Market Bulletin for Spring 2017 showed.
“The research asserts that values are still perceived to be lean however, and notes that some opportunistic purchasers are now making acquisitions in secondary submarkets,” the company added on Tuesday.
“Aside from a natural cyclical correction that was inevitable in the industrial market, a surge in newly completed warehouse space over the last year or two has prompted a flight to quality amongst existing occupiers, creating a growing pool of more secondary space, which is slow to let. This is driving a growing gulf in rents between older stock and state-of-the-art, modern warehouse facilities,” said Faisal Durrani, head of research at Cluttons.
He added that the consultancy expects the weakness to remain in the sector this year, although “opportunistic investors have been quick to capitalise on the quieter conditions, prompted by sliding capital values, particularly in more secondary locations where values are perceived to be lean.”
Meanwhile, Murray Strang, head of Cluttons Dubai commented that in spite of the slowing conditions, Cluttons continues to see an interest from international occupiers trying to gain a foothold in the market as they still see Dubai as the primary gateway to the Middle East and Africa.
“In particular, logistics and distribution centres remain popular amongst retailers and food and beverage occupiers, buoyed by the strength of Dubai’s tourism and hospitality market. To an extent, logistics and distribution have compensated for weakness in other industrial sub-sectors, such as manufacturing, heavy-metals, and oil and gas,” he added.
