Online shopping spikes demand for Dubai warehouse space

Creative Commons

• Amazon and Noon.com investing in UAE expansion
• Pandemic was catalyst for rise in e-commerce

The growth of the online retail sector during the pandemic has resulted in a surge in demand for warehouse facilities in Dubai, according to new data.

The UAE online retail sector will be valued at $8 billion by 2025, up from $5 billion in 2021 and $2.7 billion in 2020, according to a report published in March by e-commerce hub EZDubai and global research firm Euromonitor International.

The pandemic was a major catalyst, with Dubai residents forced to stay at home and embrace online shopping. 

• Luxury retail rebounds from Covid in the GCC

CRC (Commercial Real Estate Consultants), an affiliate of Dubai real estate conglomerate Betterhomes, told AGBI the number of leasing transactions for warehouse space has grown 358 percent in the first half of this year, compared to the same period in 2019. 

This is compared to 35 percent growth across the entire commercial real estate sector in Dubai over the same period.

“With the rise in demand for offices, warehouses and retail spaces, Dubai’s commercial property market will continue to attract both local and global businesses from around the world, resulting in increased commercial activities and continued growth,” Ben Barnes, a director at CRC, said in its latest report.

Amazon announced in September last year it planned to create 1,500 direct and indirect jobs in the UAE as it increased its footprint in the country, while rival Noon.com, whose backers include Saudi Arabia’s sovereign wealth fund and Emirati business tycoon Mohamed Alabbar, also announced last year it plans to invest $1 billion expanding its operations.

Dubai-founded Kibsons International distributes around 250,000 kilos of fresh meat and fruit produce around the UAE every day, and during the pandemic the growth of its online operations drove a rising need for warehouse space.

“Since the start of Covid, our demand for warehouse space has increased by 70 percent, we’ve also increased our office space to cater to the demand of the growing business,” said Daniel Cabral, procurement manager at Kibsons.

Dubai-headquartered Citron sells products targeted at babies and children to around 30 countries. Set to launch soon in the UK, after signing agreements with British retail giants Next, John Lewis and Harrods, founder Sara Chemmaa said she has expanded her warehouse space.

“With anticipated and projected growth, and with an eye on more regional distribution centres, versus relying on China, we took a two-storied warehouse space,” she said.

However, Chemmaa said the increased demand for space has meant that warehouse rental renewal rates have increased by around 20 percent this year.

Last month also saw the opening of Yiwu Market, Dubai’s first smart free zone market in the Middle East dedicated to the retail and wholesale industries. Located in the Jebel Ali Free Zone over an area of 200,000 square metres, it includes 324 warehouses spread across two floors. The warehouses are located behind the showrooms, making logistics easier.

Demand for warehouses looks set to continue, as CRC reported that the number of new potential leads for new space had increased by 139 percent year-on-year in the first six months of 2022.