Industrial rents in Abu Dhabi are expected to hold this year despite the economic slowdown, as new supply plugs a gap in the market.
A lack of quality warehouse stock in Abu Dhabi is expected to push prices up towards the end of the year, according to analysts.
“Several landlords have already increased asking prices for new developments as they near completion in areas of Mussaffah,” said Andrew Marshall, the senior surveyor at property consultancy Knight Frank in Dubai.
During the first quarter, warehouse rents in the Abu Dhabi Airports Company (Adac) Free Zone rose by about 15 per cent when compared to the same period last year, according to a Knight Frank report this month.
The shortage of good quality warehouses in Abu Dhabi has led to the expansion of existing warehouse projects.
In May, Abu Dhabi Ports launched the second phase of Kizad Logistics Park warehousing. As part of the expansion, 64 warehouse units will be handed over to tenants by the third quarter.
Abu Dhabi logistics hub Almarkaz expects to expand next year, after its owner Waha Land bagged a Dh426 million financial package for the construction of 187,000 square metres of warehousing and storage facilities, with commercial offices and food and beverage outlets.
“Our rates take into consideration the market prices, and these can sustain a slight drop in the overall market price,” said Hazem Saeed Al Nowais, the chief executive at Waha Land, a unit of investment firm Waha Capital. “The market will remain at these rates.” At Almarkaz near Mussaffah, rents hover at about Dh400 per square metre per annum, excluding service charges, insurance and other fees.
Almarkaz is banking on its diverse tenant base, which includes SMEs active in plastic and paper manufacturing businesses, food preparation, oil and gas companies, and defence and logistics. A drop in performance in a particular asset class is cushioned by the others.
“Our leases are long term, an average of six years, so even if the rates drop, we are covered,” Mr Al Nowais said.
The first stage of the project’s initial development of 1.5 square kilometres, which comprises 90,000 square metres, is fully let.
The leasing rates remained constant across most of the industrial micro-locations in Abu Dhabi last year despite a slowing economy, according to Ed Macura, a partner at property broker Core, the UAE associate of Savills.
“We expect the rentals to remain steady, however, a moderate flight to quality is likely to manifest, as existing and new tenants look to occupy newer and more efficiently planned warehouses,” he said.
With the expansion, Almarkaz will introduce taller buildings, up to 10 metres in height, and smaller pre-fitted office spaces of 175 square metres. The first buildings after expansion will be available to tenants in June next year.
More supply in the warehouse space is not going to affect Almarkaz rents, according to Mr Al Nowais.
“The amount of supply [coming in] is to serve the undersupply in the market,” he said.
The new tranche of buildings coming to the market will plug the demand.
“We will release the second tranche depending on the market conditions,” he said.
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