The surge in growth in the e-commerce sector in the region has seen increased demand for warehousing space in Dubai, but owners are witnessing a tightened market as tenants push for lower rents and better contract terms, according to a new industry report.
“Growth in the e-commerce segment has increased the requirement for storage and fulfilment centres, boosting the demand for warehouses,” global consultancy firm Deloitte said in its latest Dubai real estate report.
“Further expansion in the e-commerce and cargo sectors is expected in the short to medium term, with more design and build for specific end users, as opposed to speculative build.”
The report said the arrival of online retail giants such as Amazon and Noon has seen increased demand for next-day or same-delivery options from customers.
Deloitte predicts that this will create a need for local delivery hubs close to major residential and business districts.
While demand is growing, the report found that warehouse rents for newly built facilities developed to international standards ranged from 22 UAE dirhams ($5.99) to 35 dirhams per square feet in 2020. This compared to 28-40 dirhams in 2019.
Deloitte observed that “liquidity considerations due to the constrained business environment during 2020 has meant that a number of small and medium enterprises are now seeking annual lease contracts.”
Previously, landlords were able to demand three- or five-year contracts as standard for warehouse and industrial contracts.
The increased demand for warehouse space is a direct result of continued growth in the UAE’s e-commerce sector.
According to figures by research website Statista, revenue in the sector is projected to reach $7.456 billion in 2021 and grow at a compound annual rate of 10.3 percent to reach $11.034 billion by 2025.
In November, a survey by payment company Visa and Dubai Economy found that 49 percent of respondents in the UAE said they have been shopping more online during the pandemic.
The survey also found that consumers in the country have the biggest annual spend per online shopper, at $1,648.
Additionally, UAE online shoppers spend an average of $122 per transaction, compared to $76 in mature markets and $22 in emerging markets.