Industrial landlords get flexible with lease terms

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Industrial landlords get flexible with lease terms

Published: Tue 19 Dec 2017, 3:22 PM

Last updated: Wed 20 Dec 2017, 10:51 AM

A number of occupiers in Dubai's industrial market have started to consider build-to-suit options, particularly for larger facilities in excess of 150,000 sq ft, as there remains almost no space being developed on that scale, according to real estate consultancy Cluttons.
Although sentiment has remained subdued throughout the year, there are a number of large scale requirements in the market.
Murray Strang, head of Cluttons, Dubai, said: "While we expect the build-to-suit trend to gain momentum over the coming months in order to satisfy requirements from large occupiers, we don't expect it to be a game changer for the emirate's industrial market. At present, we are aware of requirements from a handful of onshore retailers, an online retailer and an international car manufacturer, as well as a 100,000 sq ft requirement for an existing logistics occupier to expand its operations in Jebel Ali."
The Cluttons report says there has been a marginal improvement in demand for industrial space following a relatively quiet summer. However, demand levels continue to remain lower when compared to the same period last year.
On an annual basis, secondary space at Dubai Industrial Park is the city's weakest performer, dropping by Dh8 psf to Dh32 psf, while Dubai Silicon Oasis remains the best performing market, holding steady at Dh65 psf for secondary space and Dh77 psf for grade A space.
Faisal Durrani, head of research at Cluttons, said: "While general requirement levels remain low in the industrial sector, the lack of activity provides incumbent occupiers with the opportunity to relocate to better quality stock. Across the city, rents have stagnated throughout the year, with some drops recorded, particularly in secondary grade space. We have already seen landlords demonstrating greater flexibility around lease terms, with many willing to close deals below headline asking rates and we expect this to continue into 2018."
Looking ahead, Cluttons expects the low transaction volume environment to persist over the short term, with vacant, or speculatively developed stock becoming increasingly more challenging to let. The impact of VAT at a rate of five per cent from January 1, 2018, does not seem to have phased industrial occupiers so far and with the looming Expo 2020 effect still to filter through in the form an upward tick in demand, Cluttons expect rents to remain flat over the next 12 months, before there is the potential for a turnaround in growth.

By Staff Report

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