Top-end UAE industrial-zone rents resist real estate downturn

Jafza rents rose by 16.7 percent over the year to Q1. (Reuters)
Updated 03 July 2018
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Top-end UAE industrial-zone rents resist real estate downturn

  • Tepid economy places pressure on rents in grade B developments report says
  • Rents in industrial zones such as Jebel Ali Freezone (Jafza) or Khalifa Industrial Zone Abu Dhabi (Kizad) have remained resilient

LONDON: Rents in the UAE’s most well-known industrial zones such as Jebel Ali Freezone (Jafza) or Khalifa Industrial Zone Abu Dhabi (Kizad) have remained resilient in the face of a wider market downturn, according to a new report.

While rents in lower-end or “grade B” stock have seen a “significant” fall over the 12 months to the first quarter of this year, the cost of renting stock in the higher-end market has risen, the report by property consultancy Knight Frank found.

The decline in grade B rents range from 5.4 percent to 13.7 percent in the first quarter 2018 compared to the same time period last year, according to analysts.

This contrasts to Jafza or Dubai Investments Park, where rents rose 16.7 percent and 6.7 percent respectively over the year to Q1, the report published Tuesday found.

The “tepid” economic environment in both the UAE and globally has put pressure on the industrial and logistical real estate market, analysts said.

The slower market has allowed occupiers to negotiate better deals with landlords, potentially helping them secure property in higher-end areas they might previously have been unable to afford.

More than 82 percent of enquiries year-to-date have been about acquiring space in either Jafza or Dubai Industrial Park, the report said.

Knight Frank analysts forecast that rents for the higher end “grade A” stock will continue to rise, while grade B rents are likely to sink further.

The gap between the two grades will start to close as the lower quality stock is gradually either refurbished or demolished.

“The bulk of existing facilities for many new entrants are no longer fit for purpose,” said Tom Swallow, senior surveyor, occupier solutions commercial agency, at Knight Frank.

“As more sophisticated businesses decide to enter the market we have seen the requirements for industrial and logistics real estate change rapidly.

“Much of the existing stock is either below par in terms of quality, is made up of smaller multi-tenant units, lacks connectivity and the dual license structure — which is vital for industries such as e-commerce.”

The report noted that there is a growing trend for industrial zones to offer “build-to-suit” options to potential occupants, where the developer will construct the required property to fit the occupant’s needs and then lease the building and land to them.


Etihad proposes to invest in Jet Airways at 49% discount

Updated 16 January 2019
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Etihad proposes to invest in Jet Airways at 49% discount

  • The 25-year-old Indian airline has been roiled by financial difficulties, racking up a pile of dues to pilots, lessors and vendors
  • Jet will not be able to continue funding operations beyond the next week and Etihad is willing to inject $35 million if some conditions are met

Etihad Airways has offered to pick up shares of debt-laden Indian carrier Jet Airways Ltd. at a 49 percent discount and to immediately release $35 million after certain conditions are met, CNBC-TV18 reported on Wednesday.
Shares of Jet Airways, in which Etihad already owns a 24 percent stake, tumbled as much as 7.5 percent to 271.75 rupees ($3.83) in their biggest intraday drop since early December.
The Abu Dhabi carrier has offered 150 rupees for each Jet share, CNBC-TV18 said, citing a letter from Etihad’s CEO.
Tony Douglas has written to the State Bank of India (SBI) , Jet’s biggest lender, on the restructuring plan for the Indian airline, the report added.
The 25-year-old Indian airline has been roiled by financial difficulties, racking up a pile of dues to pilots, lessors and vendors, at a time when intense pricing competition, a weak rupee and rising fuel costs are weighing on the broader airline sector in the country.
Jet will not be able to continue funding operations beyond the next week and Etihad is willing to inject $35 million if some conditions are met, the CNBC-TV18 report cited Douglas as saying in his letter.
Jet and Etihad representatives are due to meet in Mumbai with lenders, led by SBI, on Wednesday to discuss the restructuring proposal that involves Etihad increasing its stake, a source with knowledge of the matter told Reuters on condition of anonymity.
Etihad wants Jet’s founder and Chairman, 69-year-old Naresh Goyal to step down from the board and his stake to be slashed to 22 percent from 51 percent, according to CNBC-TV18.
Goyal’s penchant for control, according to people who have worked with him, has emerged as a major obstacle as the airline tries to negotiate a rescue deal, Reuters reported last month.
Etihad is also seeking an exemption from the market regulator on preference pricing and open offer guidelines to invest more for the bailout, the report added.
Under India’s capital markets regulations, Etihad is required to make an open offer to shareholders for a majority of the shares once its stake goes past 25 percent, unless it obtains a rare exemption from the market regulator.
India Ministry of Civil Aviation Secretary R N Choubey on Wednesday told reporters that the aviation ministry had not yet received an official request from Jet and Etihad for an exemption from an open offer.
Jet and Etihad were not immediately available for comment.