Region to gain from pick up in the industrial property market

Industrial property will become the main driver of the property sector in the coming years, as residential and commercial projects decline and the country refocuses on the "basics" of the economy such as logistics and trade.

Plush penthouses and gleaming towers may be what most people associate with property investment in the region but less attractive industrial sheds are where the most lucrative returns are now likely to be found.

Industrial land sale and development is set to become the dominant growth sector for property in the region as economies begin to focus on the core businesses of manufacturing, logistics and trade, a leading consultancy says.

"Light industrial and logistics will be one of the best-performing sectors of the real estate market across the Middle East and North Africa over the next four years," the consultancy Jones Lang LaSalle said in a report.

After a five-year building boom that led to the transformation of the skylines from Doha to Dubai, new residential and commercial projects have dramatically slowed down.

Many projects are on hold, while others are awaiting cancellation from the authorities. Throughout the boom, there was little attention paid to the industrial sector.

In contrast to the double-digit price growth of offices and homes, it grew at a steady rate of more than 5 per cent a year, said Craig Plumb, the director of research at the MENA office of Jones Lang LaSalle.

"That's why the market is so attractive now," he said. "It was forgotten about. It wasn't as high profile and there wasn't the same push for speculative buying and selling."

He pointed to the fact that last year about 40 per cent of the GDP of Dubai came from wholesale, transport and storage, and amounted to 25 per cent of the GDP of the whole country.

Jones Lang LaSalle has registered a 300 per cent growth in the sector in the past two years, it said.

The sector is getting a boost from the Government with new free zones opening and the expansion of existing zones. Abu Dhabi Ports Company announced last month that the new Khalifa Industrial Zone Abu Dhabi (KIZAD) near the Khalifa Port would allow foreign investors to have 100 per cent ownership. At 51 square kilometres, the zone will be four times the size of the space available at the existing port on Abu Dhabi island.

Dubai's opening of a new airport across from the Jebel Ali port has brought renewed attention to the Dubai Airport Free Zone that will have easy access to both sea and air cargo.

The activity in the industrial sector has led to new investment funds increasingly looking at financing new projects or buying existing structures for long-term leasing income.