Demand for industrial & logistics space in Dubai increased by 225% in 2024
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Rents are projected to rise by 2% per month throughout 2025 in both Abu Dhabi and Dubai, driven by tight supply and strong demand, reflecting market confidence
The UAE's industrial and logistics sector experienced an unprecedented 225% surge in demand in 2024, with Dubai's new industrial space requirements reaching 40.6m sqft, according to Knight Frank's Dubai and Abu Dhabi Industrial Markets Review 2024/2025.
The surging demand levels come hot on the heels of the UAE government's announcement of plans to grow the size of the nation's logistics sector from US $34.8bn to $54bn in the next seven years, through the establishment of the UAE Logistics Integration Council.
Faisal Durrani, Partner, Head of Research, MENA said, 'In 2024, the UAE achieved significant economic milestones, reinforcing its position as a global trade and investment hub. The non-oil PMI reading rose to 55.4 in December from 54.2 in November, marking 48 consecutive months above 50, signaling sustained business expansion, which is translating into escalating levels of demand for industrial and logistics space. Separately, foreign direct investment and international trade also recorded substantial growth last year, further catalysing new space requirements.'
Demand peaked in Q4 2024, accounting for 34% of total requirements during 2024, Knight Frank says, for 2024 as a whole, the manufacturing (19%) and logistics (18%) sectors led demand in Dubai. Retailers & traders (13%), business services (11%), and construction & real estate (11%) then followed. The sharp increase in demand is underpinning a market-wide supply shortage, with new market entrants and expansion efforts continuing to fuel rental growth.
Adam Wynne, Partner – Head of Commercial Agency, Dubai explained, 'Rents and capital values have maintained an upward trajectory. Industrial & logistics rents in Dubai surged by 33% year-on-year, with vacancy rates at just 3%. While developers are working quickly to respond to the rising level of requirements, the city's 2040 Urban Master Plan promises to deliver a new wave of industrial and logistics demand. The 2040 masterplan emphasises the development of a world-class logistics network, for instance. This includes the expansion of existing ports and airports, the creation of new transport corridors, and the implementation of cutting-edge logistics technologies.'
Dubai's industrial areas recorded significant rental growth in 2024, Al Quoz (Grade A): +45%, Dubai Investments Park (DIP): +48%, Dubai Industrial City: +38%, Dubai South: +26%. In Abu Dhabi, KEZAD Mussafah (ICAD) led rental growth, with rates surging 57% while Abu Dhabi Airports Free Zone (ADAFZ) recorded the highest rents.
During H2 2024, new large-scale industrial and logistics projects were announced in the Al Falah area, east of Zayed International Airport. Spanning 8.3sqkm, Al Falah is emerging as a key logistics hub for the capital. The new rail network will enhance supply chain efficiency, lower transportation costs, and offer a sustainable alternative to road freight, further boosting the appeal of underutilised industrial areas, as per Knight Frank.
One of the key milestones in 2024 was the completion of the Etihad Rail network, first announced in 2008. The rail network has established a cargo link between the emirates, driving increased demand around rail hubs. Knight Frank expects Etihad Rail to enhance the UAE's industrial landscape by creating connectivity between industrial zones nationwide. This infrastructure is likely to increase demand in lower-rent areas, reducing price disparities across various industrial zones.
Wynne added, 'Another game-changer will be the planned relocation of the city's primary airport to Al Maktoum International in Dubai South by 2034. This includes the expected transfer of all Emirates Airlines operations which is already impacting on the availability of land for industrial and logistics use. This move, while hugely positive for the future of the city and its economy, will put further upward pressure on rents and values as Dubai continues to grapple with a shortage of prime land and high-quality warehousing.'
Maxim Talmatchi, Associate Partner, Head of Industrial & Logistics, UAE, said, 'Land availability remains critically constrained, with most industrial parks operating at full capacity. The limited remaining plots are prioritising end-users, restricting speculative development opportunities. New supply is anticipated in late 2025 and beyond but is unlikely to disrupt the supply-demand balance. We expect rapid absorption of the 3.65m sqft of new space currently being developed across Dubai and Abu Dhabi which is due for delivery over the next two years.'
Rents are projected to rise by 2% per month throughout 2025 in both Abu Dhabi and Dubai, driven by tight supply and strong demand, reflecting market confidence. In the investment market, further yield compression is likely, Knight Frank says, with prime net initial yields projected to fall below 8%, signalling sustained investor confidence in the sector.
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