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Industrial rents falling across Dubai

Average rents in Dubai’s industrial real estate sector fell throughout the summer months.

The latest Industrial Market Performance report for summer 2016 from Core, UAE Associate of Savills, reveals that despite retaining its position as the regional logistics hub, the curtailed global trade volume and continuing oil price fluctuation is impacting demand for industrial/warehousing real estate.

CEO David Godchaux says: “Many of the existing occupiers are trying to optimize current footprint and evaluate relocation costs while new entrants are generally cautious when undertaking their first phase expansions in the region. This has led to a marginal release in supply, albeit mostly in the Grade B category. Ready built Grade A stock continues to attract tenants while large logistics requirements are purpose built and are mostly positioned in the newer submarkets.”

The research found that a sizeable gap in rental rates exists between Grade A and Grade B stock, which is attributed to build quality, scope for special and infrastructure expansion and ease of access.

Al Quoz saw its overall rents depreciate by 8% year-on-year (yoy), while Ras Al Khor witnessed a 5% dip yoy. Mr Godchaux says: “Established areas such as Al Quoz and Ras Al Khor continue to witness high occupancies – although older stock and limited room for expansion is pushing rents towards a downward adjustment.”

Jebel Ali Freezone Authority witnessed a 9% year-on-year softening in its overall rentals, however, due to its established infrastructure, it continues to attract international occupiers and offers solutions for larger spatial requirements.

“The spill-over of smaller and on-shore requirements is largely catered by the Jebel Ali industrial area as it offers supply in all formats and sizes such as manufacturing, warehousing and land plots, but with predominantly Grade B build quality,” explains Mr Godchaux. The rental range remained relatively flat between AED 32- 40 sq. ft./annum.

The new manufacturing activity in Dubai is largely positioned between the industrial zone within Dubai Investments Park (DIP) and Dubai Industrial City (DIC). DIP caters to light, medium and high tech manufacturing and warehousing requirements and has leased almost 95% of its

land, while rental movement in its sub-letting market in Q2 witnessed a marginal drop of 4% year-on-year.

Dubai Industrial City (DIC) has dedicated industrial zones and offers land leases for self-build purposes appealing to end users. It also provides industries the option to lease out ready-built warehouses for storage/logistics or light manufacturing at competitive entry levels as low as AED 28-32 sq. ft./annum and has experienced no changes in rents.
Mr Godchaux says: “The future drivers for Dubai’s industrial and logistics sector will be the servicing of maturing local and regional economies, strengthening its position as a global hub. The government is bolstering this position through the recent announcements of the new Dubai Wholesale City and Dubai Industrial Strategy, aimed at increasing total output and creating value for the manufacturing and logistics sectors.
“These new initiatives should propel trade volumes and in turn strengthen the industrial real estate in the mid to long term but may fall short to drive immediate demand in the near term. The current overall sluggish demand marks a revision of our near term outlook as we expect rents to remain flat or contract marginally for following two quarters.”

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Construction industry experts and government officials assembling in Dubai next month will tackle the threat of fires in the region, an issue highlighted by recent blazes in high-rise towers.
The latest statistics, published this month by Guardian Wealth Management, a global financial planning company, claim that up to 80 percent of expatriate residents living in Dubai are not protected against property fire.
In the build-up to the Windows, Doors & Façades Event taking place at Dubai World Trade Centre from 18 - 20 September, the latest fire safety circular issued by Dubai Municipality looks set to change the face of the construction industry.
That and the new fire safety codes, underlining the need for the right building façade materials to ensure heightened safety and fire prevention, will be top of the agenda for international consultants, government officials, high-profile construction engineers at the Middle East Façades Summit, the conference taking place alongside the first day of the exhibition.
Andy Dean, Head of Façades for the Middle East at WSP Parsons Brinckerhoff, a global engineering and design firm, believes that UAE high-rise buildings present several unique challenges, including complex evacuation strategies, fire department accessibility, smoke movement and fire control.
Speaking ahead of his participation in the Summit, he said: “The much-anticipated update to the country-specific UAE Fire and Life Safety code has been introduced and includes a significantly enhanced section on façade materials (Chapter 4). Since its original introduction in 2012, the market has consequently learned and absorbed this information and, at the very least, an awareness of the need for the control of fire performance has become self-evident, which is the first step in any learning process.”
A panel discussion, ‘Fire safety in design – translating policy into practice’, featuring Dean alongside David O’Riley, Brittania International; and moderated by Christopher Seymour from Mott MacDonald, will focus on the effective practices for ensuring highest safety standards of new construction projects as well as the ways existing buildings can be brought up to code.
Dean added: “The design challenge here isn’t innovation in safety, but in using robust and verified methods of evaluating new and innovative buildings, construction materials and techniques. However, tools such as building information modeling (BIM) and parametric modelling allow us to identify buildability problems before construction starts and, most importantly, provide us with opportunities to use cutting edge methodologies and materials while ensuring safety measures are met.”
In 2012, 70% of the UAE high-rise buildings were estimated to have utilised flammable panelling, but Dean believes the use of such materials has dropped significantly since; thanks mainly to the introduction of the UAE code. 
“A great deal has changed and materials going onto new buildings are now fundamentally different as a result,” he said. “Crucially, developers have started looking at their existing building stock as well as new design and this is the next important step the entire construction industry must take.”
The Summit will host three separate sessions dedicated to fire and safety in building design, including a panel discussion focusing on the implementation of most recent UAE Fire and Life Safety Code of Practice updates and the ways they can be implemented.
Muhammed Kazi, Exhibition Director, said: “With the recent fire incidents in high-rise towers throughout the GCC, buildings safety and fire prevention is more important than ever and the Summit will address that. Its attendees will have the unique opportunity to learn from the expert speakers and government officials what guidelines are in place to ensure building safety and how the recent policies will translate into practice.”
A panel discussion assessing most common errors in design and approaches to maximize quality, safety, and building integrity will follow, and the one-day conference will close with a presentation of a project in Beirut designed by the late Zaha Hadid, featuring an innovative façade whilst adhering to highest levels of fire safety in materials selection.
Windows, Doors & Façades Event will be the central meeting place for architects, interior designers, developers, façade consultants and fabricators from across the region to source local and international products, network with like-minded peers and learn from experts, taking place from 18 – 20 September 2016 at Dubai World Trade Centre.  A full exhibitor list and information about the event is available at www.windowsdoorsandfacadeevent.com.


Construction industry experts and government officials assembling in Dubai next month will tackle the threat …