29/01/2015

With its economic reliance on oil and gas — some 51 per cent of GDP is based on the contribution of the oil and gas-related industries — Abu Dhabi could well see some effects of the lower oil prices, with capacity being cut and other cost-reduction measures.

Ongoing construction activity in the emirate is expected to continue, but there could be a reining in of non-essential government spending.

With oil currently below $60 (Dh220.20) per barrel, oil and gas companies could well slash investment in new machinery and equipment, which will impact suppliers, as well as the trading and oilfield services businesses.

However, with the Abu Dhabi Government’s initiatives which are intended to diversify the economy, and with projects such as the development of Khalifa Port, the emirate is in the early stages of building a sustainable environment. Heavy industries and manufacturing companies appear to prefer the emirate.

With the relocation of the container and roll-on/roll-off (RORO) vessel facility to Khalifa Port, there are further incentives for logistics and automobile trading companies to take up facilities in the Khalifa Industrial Zone Abu Dhabi (Kizad).

There has been a string of high-profile relocations from the Mina Zayed area and many other companies have indicated that they are considering possible relocations, in response to the recent significant increase in rents in this area.

Musaffah and Adac remain strong locations of choice. However, occupiers with robust long-term plans, such as BRF — Brazil’s fourth largest exporter and the country’s largest manufacturer of consumer goods — are opting for Kizad. BRF recently opened a new $180 million plant in Kizad and is committed to a further $200 million investment in the medium term to consolidate its position.

This Middle East is BRF’s largest foreign market and accounted for 17 per cent of its global turnover last year. It is best known for its range of frozen and processed chickens and other poultry products, including burgers, frankfurters, bread items and sauces, under the 30-year-old Sadia brand.

The company already had a regional hub in Dubai, but the Kizad deal offered other advantages, most notably its proximity to Jebel Ali.

BRF, the largest exporter of poultry in the world, already uses Jafza as its main import hub in the region and that position will remain unchanged. However, the company’s recent investment seems to prove that Kizad and Jebel Ali can coexist and even complement each other from their locations, just a few kilometres apart.

Cold chains

Across the UAE, specialised warehouses, with cold storage and refrigeration have seen a surge in demand. With ongoing investment in cold chains (temperature-controlled supply chain facilities) and new players emerging in the cold chain business, we’ve seen an increase in enquiries for small and medium sized storage units with cold storage and refrigeration. Tenants are demanding bespoke facilities to precisely suit their needs.

This “build-to-suit” option is becoming more and more popular across the UAE, as an alternative to the adaptation of existing facilities. This means that occupiers can tailor their premises exactly to their requirements in the locations in which they wish to operate.

Occupiers have expressed reluctance to commit to large investments, but they should consider this to be an opportune time to invest, due to the stabilisation of rents which we expect in the short-to-medium term.

Looking ahead, industrial demand is predicted to be robust in response to the improvements in the global economy, combined with Dubai’s unique position to leverage this growth.

he writer is a Senior Commercial Surveyor at Knight Frank.

Arun George - Gulf News