Pre-leasing soars and 7.2m sqft of spec space in the pipeline as demand outstrips supply in Dubai’s industrial and logistics market

• Dubai industrial market critically undersupplied, with only 780,000 sqft of spec space expected this year
• Growing preference for mid-size units, with 25,000-50,000 sqft band most sought-after
• Occupiers exploring alternative locations, such as Northern Emirates, where rents are up 40%

Dubai, UAE | 29 July 2025: Industrial and logistics occupiers are increasingly targeting smaller units and looking beyond traditional Dubai and Abu Dhabi hotspots as intense competition for limited new supply continues to drive up rents, according to the H1 2025 Dubai and Abu Dhabi Industrial Markets Review report by global property consultancy Knight Frank.

The report reveals how industrial rents have risen across the emirates in H1 following a record-breaking 2024, during which industrial and logistics space requirements in Dubai rose by 225% to reach 40.6 million sqft.

Faisal Durrani, Partner – Head of Research, MENA, said: “Overall, upward rental pressure remains high, especially in well-established submarkets. These increases reflect strong occupier appetite for well-located industrial stock, while availability remains limited. Occupiers are also becoming more strategic, with a growing preference for mid-sized units. The 25,000-50,000 sqft band, for instance, has now become the most sought-after, reflecting a shift from the larger spaces favoured in 2024 and also the lack of larger units.”

Al Quoz remains the highest-priced location, with grade-A rents of AED 85 psf in Q2 2025, marking a 31% year-on-year increase. Grade-B stock in the same area commands AED 58 psf, up 21% year-on-year.

Dubai Investments Park saw one of the steepest annual uplifts, with average rents up 33% over the year to AED 60 per sqft, underscoring its position as a key logistics and distribution hub.

In Abu Dhabi, KEZAD Musaffah (ICAD) and Musaffah were standout performers, recording year-on-year rent increases of 57% and 52%, respectively. Al Markaz saw a 14% year-on-year increase, with rents holding at AED 375 psm in Q2 2025, up from AED 330 psm at the same point last year.

As supply tightens in Dubai, occupiers are actively exploring alternative emirates, such as Umm Al Quwain. This has caused industrial and logistics rents in the Northern Emirates to rise rapidly – up by 40% year-on-year, from around AED 25 psf to AED 40 psf.

SECTORS DRIVING DEMAND

Durrani added: “Industrial demand continues to be led by core sectors – logistics, manufacturing and industry, and retailers and traders remain the top three contributors to new requirements, together accounting for more than half of the total demand. However, a lack of stock is curbing new enquiries, with 6.3 million sqft of new requirements recorded in Q1 and 5.2 million in Q2, bringing the total to 11.5 million sqft for H1 2025, down by a third on the first half of 2024 as occupiers take a ‘wait and see’ approach, while others are adjusting their size requirements and some are also opting for locations in the Northern Emirates”.

Knight Frank notes that occupiers with favourable lease terms secured in recent years are opting to remain in situ, often postponing expansion plans rather than facing a market with limited options and higher rental prices. Many are waiting for new supply expected to become available over the next two to four years.

Adam Wynne, Partner – Head of Commercial Agency, MENA, said: “While demand from logistics providers remains strong, driven largely by population growth, we have seen a tapering in new requirements reflecting the supply lag following a remarkable growth period. The structural drivers for the sector remain intact and we expect demand to remain resilient, albeit more selective, through the remainder of 2025 as the market adjusts to its new equilibrium, underpinned by the continued stock shortage.”

TRANSACTIONAL ACTIVITY REMAINS ROBUST

Despite the slowdown in new requirements, H1 2025 saw robust transactional activity. In June, Knight Frank leased a 362,830 sqft facility in the Jebel Ali Free Zone (JAFZA) on behalf of a global occupier – one of the largest brokered leases in the Middle East, with a total lease value exceeding AED 85 million

Other notable transactions saw Saint Vincent Group lease a prime 68,400 sqft distribution facility on a 105,000 sqft plot at National Industries Park (NIP), while Haldiram opened one of the largest saffron processing facilities in the GCC at JAFZA in Q1. Haldiram joins 770 F&B companies already operating out of JAFZA.

Abu Dhabi also witnessed significant activity during H1 2025. For example, Aldar recently acquired high-quality warehousing and light industrial assets from Waha Capital in a deal valued at AED 530 million. The freehold assets, located in Almarkaz Industrial Park, add 182,500 sqm of net leasable area to Aldar’s logistics portfolio.

Maxim Talmatchi MRICS, Partner – Head of Industrial and Logistics, ME, said: “These transactions demonstrate sustained market demand. We have noted a significant increase in pre-leasing activity, a practice well-established in global markets but historically less common in the Emirates. However, the forthcoming supply is expected to moderate rental rates over the next 12-18 months, particularly in areas with the highest concentration of new developments.”

TRANSACTIONAL ACTIVITY REMAINS ROBUST

Although the supply shortage is forecast to continue in the short term, with just 780,000 sqft of new speculative stock due for completion this year, availability is expected to improve gradually from 2026. Almost half of this year’s stock will be provided by Radius Group, as part of a 355,000 sqft development in Dubai Investments Park 2.

Knight Frank is tracking approximately 7.2 million sqft of new industrial and logistics space due to be delivered to the Dubai market over the next four years. The biggest milestone will be in Q3 2026, with the completion of Phase 1 of Terralogix in Warsan, Dubai’s largest private logistics park. This development will introduce much-needed scale and flexibility, with 550,000 sqft due to be completed in Phase 1. The full project will be delivered over three phrases, totalling 1.8 million sqft.

Another major milestone is the 1.55 million sqft development planned for NIP by 2028. The grade-A, LEED-certified logistics park will be delivered by Aldar in strategic partnership with DP World. The first phase, comprising 500,000 sqft, is expected to be completed by mid-2026.

In total, nearly 2.8 million sqft of new industrial and logistics space is expected to delivered in 2026 – the largest yearly addition in recent years.

Wynne concluded: “The growing warehouse pipeline marks a clear shift, with significantly more projects being delivered than in recent years. This is incredibly positive for the economy, supporting job creation, business expansion and foreign direct investment, and as more stock becomes available, we anticipate a more balanced environment, providing occupiers with a wider range of options to enable their business growth.”