_Abu Dhabi industrial and logistics market update - March 2017

Supply

The lack of sufficient high quality warehousing space constrained occupier movement and kept rents flat throughout the year in the majority of industrial areas. 

Occupancy rates in well-established industrial zones such as Abu Dhabi Airport Free Zone continue to be strong.

Areas with poorer quality warehousing and infrastructure such as Musaffah, have seen declines in rent in the region of 9% in 2016. As new industrial areas such as KIZAD continue to gain traction it is expected that it will trigger a flight to quality as has been seen in Dubai. 

KIZAD continues to invest heavily in world class infrastructure and terminal capacity, which will likely be a draw for companies and investors in 2017. Phase one of their light industrial park has been leased out and phase two has recently launched, providing high quality terraced warehouse units from 12,000 sq ft BUA.  

2016 saw further development in Masdar City with the launch of the Eco Logistics Park. The Eco Logistics park offers customised build to suit opportunities and will also hand over a number of speculatively built high quality logistics units from 22,550 sq ft in Q4 2017.

Demand

With the decline in hydrocarbon prices the demand for industrial space was impacted.  We received the greatest number of enquiries from the general trading sector in 2016, comprising 26% of total interest. 15% and 13% of enquiries came from the SME and IT sectors respectively. 

It is interesting to note that in 2016 we received no enquiries from the oil and gas services sector, when in previous years this made up at least 25% of total interest. This is of course symptomatic of a lower oil price and challenging market conditions for this particular sector.

Likewise, enquiries from the construction sector were down to 10% in 2016, when in previous years interest from this sector contributed 50% of total enquiries. We expect this to recover in 2017 on the back of new government strategies to spur growth in the economy through infrastructure, housing and construction projects.

Key findings 

• Abu Dhabi’s industrial market, like Dubai, is characterised by a lack of high quality available warehousing, particularly for large scale logistics/ general trading requirements.  The government of Abu Dhabi and GREs such as KIZAD, continue to heavily invest in excellent infrastructure (roads, port and rail), which in turn is attracting industrial occupiers seeking large parcels of land to develop facilities 
• Recent examples include Al Futtaim relocating a large amount of their operations from JAFZA to KIZAD and the UAE Siddco Group establishing an engineering facility over a 1.3 million sq ft plot.
• Honeywell, global technology manufacturing company, are proceeding with a 75,778 sq ft build to suit light industrial facility in the Eco Logistics Park, Masdar City

Read the results of our latest UAE Industrial & Logistics Research Report in full here.