Demand for e-commerce warehouses in the UAE surges, but storage fees fall instead of rise

The rapid growth of the UAE’s e-commerce sector has led to an increase in demand for warehouse space as e-commerce companies look for suitable distribution centre locations close to prime residential and commercial areas, a new industry report shows.

According to data from the research website Statista, UAE e-commerce revenue is expected to reach US$7.456 billion in 2021 and will reach US$11.034 billion in 2025 at a compound annual growth rate of 10.3%. According to a joint survey by payment company Visa and Dubai Economy, 49% of UAE consumers surveyed said they shopped online more during the epidemic than before.

With the increase of e-commerce business and more and more online shoppers, the demand for e-commerce warehouses is on the rise. And because Amazon and Noon, which provide fast delivery services such as same-day and next-day delivery in the UAE, ensure that goods are delivered to consumers quickly and efficiently, the rising trend of warehouse demand is even more obvious.

However, warehouse owners are facing a dilemma as tenants demand lower rents and better contract terms. Deloitte said the e-commerce and freight industries are expected to expand further in the short to medium term, with more long-term considerations rather than speculative construction.

Despite the growing demand for e-commerce warehouse space, warehouse rents in the UAE have fallen instead of rising. According to a report by Deloitte, warehouse rents for new facilities developed to international standards in 2020 ranged from 22 to 35 UAE dirhams per square foot (about 39 to 62 yuan) , while warehouse rents in 2019 were 28 to 40 UAE dirhams (about 49 to 71 yuan).

Deloitte said the drop in e-commerce warehouse rents was due to the restricted business environment in the UAE in 2020 , with small and medium-sized enterprises focusing more on liquidity, so they are now seeking annual lease contracts . Before the outbreak, warehouse owners required three to five years of warehouse and industrial contracts as standard.

middle East

United Arab Emirates