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Thursday, 19 May 2011 19:33 |
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After years of speculative development that forced international logistics companies to lease inferior quality and light industrial buildings, the report stated that Q1 2011 has been marked by the completion and occupation of a number of "super sheds" that would appeal to many institutional investors.
The recent completion of the 650,000 sq ft shed for the leading CEVA Logistics in JAFZA's south zone for example, is the first development delivered in the region by Gazeley, a global provider of logistics space. The facility is designed and built on the exacting requirements of CEVA Logistics which provided a detailed input into the operational aspect of the design. Prior to completion, the building was sold to a third partly investment fund with CEVA Logistics signed up to a 20 year lease.
High quality logistics and distribution facilities with institutionally recognized lease terms in place are achieving upwards of 30 AED per sq ft in the current market. This has created a two-tier market, when contrasted with low quality warehousing, where rents are around 21 AED per sq ft.
The facilities achieving higher rental yields offer occupier led design points and a high build quality matching the standards expected by international occupiers in more developed markets such as Europe and North America. With the increased level of quality premises recently coming online in Dubai World Central (DWC) and Jebel Ali Free Zone (JAZFA), it is hoped that the design and build of new logistics facilities will continue to be shown consideration which should help the market become more appealing to both large international occupiers and investors alike.
Pricing analysis:
Yields for larger high quality logistics facilities have compressed to below 10% down from 13-14%, where they were during 2007-2008. This is due to the increase in investor appetite seeking high quality, guaranteed income streams from well-capitalised organisations
Current lease rates in JAFZA and Dubai Investments Park (DIP) for low quality warehouse facilities built on a speculative basis have slightly dropped to below AED 21 per sq ft in quarter one of 2011
Bucking the trend, high quality logistics and distribution facilities with institutionally recognised lease terms in place are still achieving upwards of AED 30 per sq ft.
Source: Cluttons
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