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warehouse worker in uniform is inspecting shipment for delivering to customers. Image used for illustrative purpose. Getty Images
The UAE’s logistics and industrial real estate sector is witnessing sustained growth, driven by rising demand, expanding e-commerce, and strategic government initiatives.
This comes as vacancy rates have dropped to record lows, with Grade A warehouses in high demand, pushing occupancy rates to nearly 90-95 percent, according to Abhishek Mittal, head of industrial advisory, MEA at JLL.
“The demand is fairly robust at the moment,” Mittal said. “It’s coming from e-commerce sales, third-party logistics (3PL) providers, and freight forwarders. The UAE, being a major transshipment destination, sees large volumes funneling into free zones, though we’re now seeing diversification into mainland supply chains as well.”
Industry experts suggest that supply, however, remains tight in the UAE. Over the next 18 to 24 months, Mittal expects about 300,000 – 500,000 square metres (sqm) of new space to come online, driven by key developments such as Aldar’s 150,000 sqm project and JAFZA’s logistics expansion. Despite this influx, he anticipates rental rates will stabilise rather than decline.
E-Commerce and specialised logistics
According to Knight Frank, industrial and logistics demand in Dubai surged by 225 percent in 2024, reaching 40.6 million square feet — a record high. This demand spike has driven rents up by 33 percent year-on-year, with vacancy rates averaging just 3 percent. Dubai Investments Park saw the sharpest rise, with rents climbing 48 percent to AED 50–70 per square foot, while Al Quoz Grade A rents soared by 45 percent to AED 72–100 per square foot.
Kunal Lahori, director of Manrre REIT Logistics Fund, echoed the sentiment of sustained growth, highlighting a sharp rise in rental rates across key industrial zones with some surging by more than 20 percent.
He attributed this demand to the rapid expansion of e-commerce, cloud kitchens, and dark stores, which are driving the need for specialized logistics spaces. “We are seeing a surge in demand for cold storage and high-tech fulfillment centres,” Lahori said.
Abu Dhabi gains momentum
Institutional investors are showing growing interest in the UAE’s industrial sector. Manrre REIT Logistics Fund recently secured 500 million UAE dirhams from GFH Partners, a testament to growing investor confidence, according to Lahori.
“With rising land and rental costs in Dubai, we are seeing a clear shift in investor and tenant interest toward Abu Dhabi and other Gulf markets. Abu Dhabi, in particular, has witnessed an uptick in industrial rental registrations, signaling growing demand,” he said.
JLL’s Mittal also highlighted the rising costs affecting tenants, noting that rents have increased, particularly in Dubai, across both land and built-up areas. However, he pointed out that Abu Dhabi is emerging as a competitive alternative, offering high-quality infrastructure at more affordable rates.
“Projects like KEZAD Logistics Park and the ADAFZ developments are attracting occupiers looking for more affordable alternatives without sacrificing infrastructure quality,” he said.
He noted that inner-city logistics, driven by last-mile delivery platforms, is a major driver of demand. “We’re seeing companies like Noon and Amazon expand their dark store and micro-fulfillment networks to ensure faster delivery times — sometimes within an hour,” he said.
Advanced manufacturing
Matthew Green, Head of Research at CBRE MENA, described the UAE’s industrial market as, “characterised by robust demand and record-low vacancy rates," driven by targeted government initiatives, strategic investments, and a growing population and supported “a growing population, strong consumer, rising e-commerce sales and post-COVID supply chain diversification.”
Green highlighted Abu Dhabi’s increasing appeal for occupiers looking to balance costs. “Abu Dhabi offers investors a compelling option, with a more competitive cost structure for utilities and strong government support, as the Emirate looks to position itself as a major industrial hub through strategic initiatives like the Abu Dhabi Industrial Strategy, and substantial infrastructure investments in industrial zones like KEZAD Al’Mamoura,” he said.
He also pointed to the UAE’s broader push into high-tech and advanced manufacturing. “The UAE’s push to develop a larger and more dynamic manufacturing sector includes a major focus on advanced manufacturing, logistics, and food, supported by the government’s strategic initiatives and major infrastructure investments.”
Mittal added that the UAE’s ability to pivot towards high-tech industries is also reshaping demand. “Sectors like pharmaceuticals, electronics, and advanced manufacturing are driving new requirements for specialised facilities. These businesses need temperature control, high security, and advanced handling capabilities — the traditional warehouse model doesn’t cut it anymore,” he said.
Lahori added that they are also developing Grade A specialised warehouses, which remain limited in availability. “These state-of-the-art, box-style warehouses feature 20-metre-high ceilings, multiple loading bays, air-conditioning, and advanced sprinkler systems,” he said.
Designed to enhance operational efficiency, Lahori noted that these facilities provide tenants with a “highly functional and optimised logistics environment.”
A global logistics hub
Green emphasised the attractiveness of the UAE’s industrial assets to investors, noting that “the UAE’s industrial sector is becoming highly attractive to both regional and international investors, as reflected in the rising investment liquidity.”
The UAE government’s ambition to position the country as a global logistics and manufacturing hub is backed by significant infrastructure investments, free zone incentives, and streamlined regulatory processes. With a top-seven global ranking in the Logistics Performance Index and continuous expansion of ports and airports, the UAE remains a prime destination for foreign direct investment (FDI), which reached $35 billion in 2024.
“The stability the market provides, coupled with major infrastructure projects and enhanced regional connectivity, will continue driving considerable growth,” Mittal said.
As the UAE’s industrial landscape continues to evolve, developers are navigating rising land costs with innovative strategies, including build-to-suit solutions and speculative developments. Lahori anticipates that the market is on track to double its logistics footprint within the next year, driven by strategic partnerships and an urgent push to meet surging demand.
With cold chain logistics, high-tech manufacturing, and last-mile delivery centres at the forefront, the UAE’s logistics market is set to remain a heavyweight in the region - and an increasingly vital hub for global supply chains.
(Reporting by SA Kader; Editing by Anoop Menon)
(anoop.menon@lseg.com)
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