The light industrial/logistics sector will be one of the best performing real estate market segments across Middle East North Africa (MENA) region over the next few years, according to the latest research from Jones Lang LaSalle.
This positive outlook for the logistics sector is being driven by regional government initiatives for economic diversification from energy-based industries towards expansion into other commercial sectors such as trade, export-import, tourism and logistics. This renewed focus is paving the way for more investments in major new transport infrastructure including seaports, airports and important new rail initiatives across the MENA region. This investment is itself one of the major drivers of demand for light industrial/logistics real estate.
"The logistics sector of the real estate market is the number one enabler of projected trade growth across the region. Trade forms a critical part of regional economies, increasing by 23% in 2010 across MENA and is forecast to increase by over 15% per annum over the next five years. Additionally, the region's rapid population growth and relatively young demographics are also acting as demand drivers for the light industrial/logistics sector," commented Michael Heitmann, National Director - Industrial Services, Jones Lang LaSalle MENA.
Michael Heitmann added: "Strong occupier demand will stimulate increased interest in the light industrial logistics sector from developers and investors. This sector offers more opportunities for investors looking for secure, long-term income producing assets than and importantly remains largely unaffected by the recent downturn as it has not witnessed the same level of speculative construction as the residential, commercial or hotel sectors."
According to Jones Lang LaSalle there remains strong underlying demand for quality light industrial/logistics units but the sector continues to be tightly controlled by governments in the MENA region due to its strategic importance to the overall economy. Maturity of the logistics sector globally will see many companies seeking to upgrade to higher quality real estate facilities which in turn will drive up demand for quality assets regionally.
"Despite the restrictive entry barriers and government controls, the light industrials/logistics sector offers increasing opportunities for the private sector and meets investor's requirements for more secure real estate investments with stable long term cash flows. We expect higher levels of sales activity in this emerging segment along with a stronger investor interest for properties securely leased to major international occupiers on long-term leases", added Craig Plumb, Head of Research, Jones Lang LaSalle MENA.
With its numerous industrial areas and free zones, Dubai is the most developed light industrial/logistics market in the MENA region offering the best regional accessibility through its sophisticated ports and airports. There is currently a total of approximately 65 million m² of industrial stock in Dubai, comprising two distinct submarkets that are defined as free zones and non-free zones. Over the medium term, there is likely to be a shift towards newer industrial areas because of better infrastructure systems, quality real estate products and proximity to major infrastructure projects.
Dubai's new airport near Jebel Ali port is one such example which will provide seamless access to both sea and air cargo. On the other hand, the Jebel Ali Free Zone and port continues to be a one-stop shop for facilitating trade flows across the region.
Craig Plumb concluded: "Dubai is the services hub of the MENA region and the light industrials/logistics sector is one of the pillars of its economy. In 2009, trade, transport and logistics comprised about 40% of Dubai's GDP. This sector will therefore continue to play a pivotal role in Dubai's economy for the foreseeable future."
Source: Jones Lang LaSalle