UAE Industrial & Logistics Market Review
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RESEARCH UAE INDUSTRIAL & LOGISTICS MARKET REVIEW 2019 THE UAE’S INDUSTRIAL AND LOGISTICS SECTOR CONTINUES TO MATURE PROVIDING NEW OPPORTUNITIES FOR OCCUPIERS INDUSTRIAL RESEARCH UAE INDUSTRIAL & LOGISTICS MARKET REVIEW 2019 UAE INDUSTRIAL & LOGISTICS MARKET REVIEW 2019 stake in its Dubai business. On the back FIGURE 1 of this, the firm intends to strengthen its Cost of Doing Business - Manufacturing presence in the Middle East. Headlines The strategy aims to take advantage of These initiatives to ease regulations in $ 7 Macroeconomic the UAE’s modern infrastructure, ranked the UAE will ensure that its regional hub th status as an industrial and logistics hub Take-up from new entrants of industrial and sector overview 5 globally (Figure 2) and central location. $ 6 and logistics space has been limited. Its geographical location places the stands firm in the face of increasing Global economic growth rates over the The relatively anaemic level of growth in UAE on the doorstep of MEASA and its competition from regional peers. From a last year have begun to moderate, with $ 5 demand coupled with greater levels of three billion inhabitants, a further two real estate and operations perspective, global GDP growth slowing from 3.8% supply has exerted pressure on industrial billion inhabitants are accessible within in order to set itself apart from the in 2017 to 3.6% in 2018 according to $ 4 real estate. an eight-hour flight time. The UAE also regional competition, the UAE must IMF estimates. Escalating trade and complements this with its favourable soft now focus on providing solutions that USD, Millions In the year to Q2 2019, average headline geopolitical tensions have also weighed infrastructure, where its World Bank Ease cater towards medium and high-tech $ 3 industrial rents have softened in Abu on global growth rates; the global trade of Doing Business ranking has rapidly sectors in manufacturing. In established Dhabi and Dubai by 12.1% and 4.8% volume growth rate has slowed from improved from 21st in 2018 to 11th in 2019. manufacturing output markets such as $ 2 respectively. 5.5% in 2017 to 3.7% in 2018. The Singapore, Japan and South Korea, impact of these headwinds has largely These attributes have already attracted In both cities, we are seeing a two-tiered the medium and high-tech technology $1 been borne by the manufacturing sector, many multi-national firms to use the UAE market continuing to operate where rents manufacturing sector accounted for over whilst the service sector has remained as their regional supply and redistribution for Grade B stock continue to fall at a 75% of manufacturing according to the relatively resilient. gateway. Despite this take-up, the $ faster pace compared to Grade A stock. UNIDO. Increasing the share of medium manufacturing and transport and storage Park Park The UAE, as a central trading hub, has and high-tech investment in this sector Zone sectors have shown lacklustre growth of Zone Free will be critical for the UAE in achieving the Riyadh 3rd felt the impact of these headwinds Dubai South Dammam 3rd Industrial City Industrial City King Abdullah 27% each over the 10 years to 2018. Economic City Industrial Sharjah Airport Sohar Port and Ras Al khaimah Investment Park more acutely in comparison to the UN’s Sustainable Development Goal Nine, Zone Trade Free Dubai Investments JebelAli Free Zone JebelAli Free National Industries global average and its emerging market Over the last year, there have been various doubling the manufacturing industry’s Bharain International International Freezone Khalifa counterparts. The UAE’s manufacturing, initiatives that have been enacted to share of GDP by 2030. facilitate stronger growth rates in these Cost of Setup of a Manufacturing Business Lower Estimate Total transport and storage output, which are Looking ahead, global GDP growth is sectors. On a federal level, we have seen Cost of Operations of a Manufacturing Business Higher Estimate Total the third (9.9% of GDP) and sixth largest forecast to weaken further in 2019 to the UAE Cabinet announce a list of 122 (6.4% of GDP) components of the UAE’s 3.2% before strengthening to 3.5% in activities and 13 sectors that have been economy, have both seen their annual 2020, both projections are 0.1% lower Source: KPMG rate of growth slow from 5.0% and approved for 100% foreign ownership, 4.3% in 2017 to 1.9% and 1.4% in 2018 with local governments given the ability respectively. In comparison to global to cap the level of foreign ownership. The compared to forecasts made in the first benchmarks, the United Nations Industrial manufacturing industry and transport and FIGURE 2 quarter of 2019. Global trade volume MATTHEW DADD Development Organisation (UNIDO) storage sector are among the activities UAE Competitiveness, Global Rank (out of 140) Partner, Occupier Solutions growth is also expected to weaken further, data shows that the average share of approved for 100% foreign ownership. Commercial Agency (OSCA) with forecasts expecting the 2019 rate manufacturing of GDP in developed One of the historic drawbacks of Free Quality of overall infrastructure of growth to decline to 2.5%, down from “Initiatives by the government countries stands at 19.6%, currently the Zone licences has been the limitation 15 3.7% in 2018. Over the same period, UAE is some distance from this mark at to ease regulations in the that firms may only operate within Free trade volumes of developed markets are 9.2%. UAE will ensure that its Zone boundaries. With the expansion of Overall infrastructure ranking Quality of roads forecast to decline from 3.1% to 2.2% regional hub status as an There are material challenges for dual licencing, which initially was limited and in emerging and developing markets industrial and logistics hub incumbents in these sectors, these are to Free Zones such as Abu Dhabi Global from 4.7% to 2.9%. Trade volume growth 9 stands firm in the face of not only economic challenges, but also Market, D3, Dubai International Financial is expected to pick up for both developed increasing competition challenges raised by rapid changes in Centre and Dubai Airport Free Zone, this 5 and emerging markets in 2020 to 3.1% supply chains and customer demands. limitation has effectively been removed. from regional peers. From a and 4.8% respectively. Despite these headwinds, the long- Dual licencing is now applicable in real estate and operations Efficiency of air Liner shipping Stronger forecasts for long-term global term prospects for the sectors remain 7 12 over eight main Free Zones in the UAE, transport services connectivity index growth, coupled with significant easing of perspective, in order to set favourable for firms that are agile to allowing firms to retain 100% ownership, regulations over the last year are expected itself apart from the regional this change and countries that provide tax and excise duties advantages but to underpin growth in the UAE’s industry competition, the UAE must the right infrastructure and malleable removing the chief drawback of only 3 sector (which consists of the extraction, business environment. now focus on providing being able to trade within the Free Zone. manufacturing, utilities and construction solutions that cater towards The UAE recognises the importance The easing of such regulations as well sectors) over the next decade. This 13 medium and high-tech and potential of the manufacturing and as Dubai’s proposed common Free Zone Airport Connectivity forecast growth is likely to be centred in Efficiency of seaport service sectors in manufacturing.” logistics sectors. As a result, these licence law amendment announced in 19 the UAE’s two largest economies, Abu sectors are a core facet of the UAE’s May are likely to drive activity in the sector Dhabi and Dubai, where growth over economic diversification plans, examples from both existing and new occupiers. the next decade to 2028, is forecast to Quality of transport infrastructure include the UAE Vision 2021, Abu Dhabi’s Mars, the confectionery giant, has been register at 37% and 57% respectively. Economic Vision 2030 and Dubai’s one of the first multi-nationals that has Industrial Strategy 2030. taken advantage of the new foreign Please refer to the important notice ownership regulation by making whole its at the end of this report. Source: World Economic Forum UAE INDUSTRIAL & LOGISTICS MARKET REVIEW 2019 UAE INDUSTRIAL & LOGISTICS MARKET REVIEW 2019 FIGURE 3 FIGURE 4 Abu Dhabi industrial zones overview Dubai industrial zones overview Dubai Maritime City JAFZA National Jebel Ali Industries Industrial Al Quoz Park DAFZA JAFZA Dubai Investments Ras Al Khor Park DIC Dubai KIZAD South Mussafah ADAFZ ICAD Al Markaz Khalifa Industrial Jebel Ali Dubai Industrial City of Abu Dhabi Airport Dubai Airport Dubai Location Mussafah Zone Abu Dhabi Location Al Quoz Al Qusais Ras Al Khor JAFZA Industrial DIC Investments Dubai South Abu Dhabi Free Zone DUBAI Free Zone Maritime City (KIZAD) Area Park ABU DHABI Established 1998 2004 2010 2006 Established 1996 1973 1975 1976 1985 1995 2004 1997 2006 2007 Non Free Zone / Free Non Free Zone Status Non Free Zone Non Free Zone Free Zone Status Free Zone Non Free Zone Non Free Zone Non Free Zone Free Zone Non Free Zone Non Free Zone Non Free Zone Non Free Zone Zone / Free Zone Total area Total area (sq km) N/A 40 100 12 0.7 27 8 12 56 22 32 52 146 2.3 (sq km) 32 minutes to AUH Time Located next 25 minutes to 15 minutes to 18 minutes to 25 minutes to 15 minutes to 20 minutes to 15 minutes to Located next 20 minutes to Time to airport 20 mins to AUH 22 mins to AUH Located next to AUH & DWC to airport to DXB DXB DXB DXB DWC DWC DWC DWC to DWC DXB Source: Knight Frank Research Source: Knight Frank Research Note: This map is for illustrative purposes only.