Despite the decline in oil prices and amid the uncertainty in the global economy and the GCC region, UAE stands as a strong performer due to its steadfast unflagging efforts to diversify the economy and break the chains from its oil bound industry. Nowadays, UAE ranks as one of the fastest growing economies registering build-up in sectors like metals, building materials, food and beverage manufacturing, or digital manufacturing technologies. The bold vision set forth by the government is seeking to develop more high end manufacturing expected to play a crucil role in creating jobs for the rapidly expanding population, by offering the infrastructure necessary to build micro-factories and sustain the consumers good and services.
From a real estate point of view, I am going to point out in this article why investing in a warehouse represents the best alternative to the luxury market:
A warehouse can be easily converted into a showroom or a retail space, or be used as an office space. Manufacturers can transform their warehouses into production base for their goods, or to sell their inventories. A warehouse can have multiple purposes and can be modified according to needs.
- Minimal risk investment / Stability
Considering the continuous demand for storage spaces, the volume of transactions related to warehouses has been on an upraise, while the rental price index has been maintained accessible for both investors and companies/manufacturers, depending on the nature of their activity with prices ranging from AED 35 per sq/f in the industrial area of Jebel Ali and AED 25 per sq/f in secondary industrial areas. In principal areas, such as Al Quoz the prices have been estimated somewhere in between AED 50/55 per sq/f and AED 65/77 per sq/f in Dubai Silicon Oasis, while Dubai South has emerged as one of the most sought after locations, in line with the expansion of Al Maktoum International Airport, with prices from AED 60 per sq/f.
- New units
The Dubai warehousing sector recorded the entry of new units to the market in 2016, most of which were in Dubai South and Dubai Wholesale Trade City. The Dubai Industrial Park (DIP) offered 70 new units of warehouses and warehouses for leasing within the 618 units of the warehouses already existing in the complex. Jafza completed the construction of 110 new warehouses, all located in the southern region. In terms of occupancy, Jebel Ali Free Zone maintained the lowest percentage of vacant spaces, which did not exceed 5%, followed by the Dubai Investment Park. At the beginning of this year there were more than 100 new companies recorded within the complex, which has led to an increased demand for storage spaces.
- Multiple sectors
The food and beverage industry leads the demand for storage and warehouse spaces in Dubai. The f&b sector witnessed a steady growth in 2016 as a result of the population growth and the constant flow of the tourists’ movement, followed by the wholesale and retail trade, which also expanded through the increasing number of traders and investors who have chosen Dubai to expand their investments, pondering the infrastructure and the development of government services available at all ports and airports, as well as advanced legislative structure and promoted partnerships between the public and private sectors. Last, but not least, the industrial sector, which the government pays great attention to, has been in high demand of warehouses in various areas.
- Great factors and better ROI
The expansion of freehold areas for developers and end-buyers in the main areas of Dubai, especially Dubai South, in addition to the boom in the logistics market which contributed to the high demand for this type of property, have constituted great factors for the developers to exploit these opportunities, being backed up by the government, which has granted all the facilities for these category of real estate developments to take place. Renting or buying a warehouse in Dubai has turned therefor in a major investment opportunity, which offers a guaranteed ROI of 8% to 10% annually.