Dubai and Abu Dhabi Industrial Markets Review

Market Undersupply & Fast-Rising Rents in Dubai and Abu Dhabi's Industrial & Logistics Space

The latest Dubai and Abu Dhabi Industrial Markets Review paints a picture of a market running hot: demand for industrial and logistics space is outpacing new supply, pushing rents sharply higher and reshaping where – and how – businesses operate.

Severe Space Shortage in Dubai

Dubai's industrial market is now critically undersupplied. After a record 2024 – when requirements for industrial and logistics space jumped by 225% to reach 40.6 million square feet – the pipeline has not kept up. In 2025, only around 780,000 square feet of speculative space is expected to come to market, a fraction of what occupiers are looking for. With so little new space available, upward pressure on rents remains intense, especially in prime, well-located areas.

Rents Surging in Key Locations

Limited stock is feeding directly into rental growth across established industrial zones. Competition for space is fierce, and landlords are clearly in the driving seat. In short, the undersupply story is creating a classic squeeze that is lifting rents in core markets and pulling secondary locations into play as alternative hubs.

Abu Dhabi Joins the Rental Rally

Abu Dhabi's industrial hubs are not being left behind. Strong demand and tight supply have pushed rents sharply higher here as well. These figures underline that the undersupply story is not just a Dubai phenomenon; Abu Dhabi's better-located industrial areas are clearly experiencing similar pressures.

Occupiers Pivot to Mid-Sized Units

One of the most striking findings is how occupiers are reshaping their strategies. Companies are increasingly targeting mid-size units, especially those between 25,000 and 50,000 square feet. This size band has become the most sought-after, reflecting key trends where businesses are becoming more surgical in their space requirements, trimming excess and focusing on right-sized, efficient facilities that they can actually secure.

Spillover to the Northern Emirates

As Dubai's space crunch intensifies, occupiers are actively looking beyond the traditional hotspots of Dubai and Abu Dhabi. Locations in the Northern Emirates, such as Umm Al Quwain, are attracting growing attention. This shift has had a dramatic effect on rents in these alternative markets, with rates climbing from roughly AED 25 per square foot to around AED 40 per square foot. What was once secondary space is now being pulled into the core of regional logistics planning, simply because Dubai's most established submarkets do not have enough suitable stock at palatable prices.

Demand Still Strong, but More Selective

Demand remains fundamentally healthy, led by logistics operators, manufacturers and industrial players, and retailers and traders. Together, these groups account for more than half of total new requirements. However, a lack of suitable stock is now clearly holding back fresh enquiries. New requirements totalled 11.5 million square feet in H1 2025 – a drop of about one-third compared to the first half of 2024. This represents not fading appetite, but rather companies with attractive leases signed in recent years choosing to stay put and delay expansion, rather than face today's limited options and higher rental levels.

Pre-Leasing Takes Off as a Sign of Undersupply

One of the clearest signals of a tight market is the sharp increase in pre-leasing activity. Companies are committing to buildings before they are even completed. This practice is common in more mature global markets but has historically been less prevalent in the Emirates. Its growing popularity now sends a simple message about market conditions and occupier urgency.

Major Transactions Signal Market Confidence

Despite supply constraints, transactional activity has remained remarkably strong. Knight Frank brokered a landmark lease in the Jebel Ali Free Zone spanning 362,830 square feet for a global occupier, with a total lease value exceeding AED 85 million. Other notable transactions include Saint Vincent Group's lease of a 68,400 square foot distribution facility and Haldiram's opening of one of the largest saffron processing facilities in the GCC. On the investment side, Aldar's acquisition of high-quality warehousing and light industrial assets from Waha Capital for AED 530 million demonstrates sustained market confidence.

Future Pipeline and Rental Pressure Relief

Approximately 7.2 million square feet of speculative space is now in the pipeline for future delivery over the next two to four years. This forthcoming supply, combined with strong pre-leasing activity, is expected to ease rental pressures and provide occupiers with better choice and negotiating power. The market is shifting from crisis-level shortages toward a more balanced, predictable cycle where both occupiers and capital can plan with greater confidence. As new schemes complete, rental growth should moderate rather than continue at the breakneck pace seen in recent years, creating a more mature and orderly market environment.