What happens when the chokepoint shifts to the warehouse?

What happens when cargo has nowhere to sit? Since the war began, freight freight flows have become more volatile — trucks absorbed the shock, rail hit structural limits, and airlines grappled with fuel constraints. But the real bottleneck may be quieter: warehousing.

The conflict stalled parts of the Gulf’s industrial and logistics demand pipeline amid a period of extreme uncertainty. “The war had a noticeable impact on occupier demand patterns across the region,” Maxim Talmatchi, Partner, Head of Industrial and Logistic at Knight Frank UAE, tells EnterpriseAM.

The first reaction was caution: Around one-third of active warehouse requirements were paused at the peak of uncertainty, as occupiers waited for greater clarity on how the conflict would affect operations and supply chains, Talmatchi says. Some of those requirements have since returned to the market after the April ceasefire.

Air freight absorbed the initial shock

Occupiers prioritized continuity over expansion. Occupiers focused on continuity over expansion, shifting parts of their supply chains from sea freight to air freight rather than taking on new warehouse space, as concerns over Hormuz mounted, Talmatchi says.

Air freight kept goods moving, but at a significant premium. “While this significantly increased logistics costs — which are ultimately expected to be passed on to consumers — it also allowed many businesses to maintain operational continuity without materially increasing their warehouse footprint or inventory holdings,” Talmatchi argues.

The cost impact is now filtering into carrier pricing: Maersk’s latest updates signal higher fuel volatility, rising fuel surcharges, and the introduction of transit disruption surcharges to reflect tighter capacity and rerouting pressures.

Rents didn’t move in one direction

The war dampened sentiment in some locations rather than driving rents uniformly higher. “We are still assessing the full rental impact by location and asset type; however, it is evident that the disruption has introduced a softer market sentiment across parts of the industrial and logistics sector,” Talmatchi argues. “At this stage, rental softening appears to be more pronounced in areas that experienced the strongest rental growth over the past cycle,” he adds.

That adjustment follows a period of pronounced rental inflation across core industrial hubs. Al Quoz remained the UAE’s most expensive industrial location, with Grade A rents reaching AED 85 per sq ft in 2Q 2025, up 31% y-o-y, while Dubai Investments Park increased 33% to AED 60 per sq ft. In Abu Dhabi, KEZAD Musaffah (ICAD) and Musaffah recorded gains of 57% and 52%. The scale of prior growth helps explain why the disruption translated into caution rather than continued rent chasing.

When cargo reroutes, storage follows

Fujairah is seeing rising interest as occupiers diversify logistics footprints. Talmatchi says Knight Frank has “observed increased occupier interest in alternative logistics locations such as Fujairah, particularly tenants seeking either land or warehousing solutions — a trend that was far less common prior to the conflict.” This reflects a broader operational reconfiguration, with Fujairah and Khor Fakkan increasingly acting as secondary gateways as cargo flows are rerouted across multimodal networks.

At the same time, the UAE’s industrial geography is broadening. Dubai and Abu Dhabi continue to anchor the market, but supply constraints are pushing demand outward. Knight Frank’s 1H 2025 data shows just 780k sq ft of speculative industrial space expected in Dubai this year, while Northern Emirates rents rose 40% year-on-year as occupiers expanded into alternatives including Umm Al Quwain.

The essentials test

Essential goods drive the clearest storage pressure. “The strongest demand for additional storage capacity came from food-related industries,” Talmatchi says. Logistics operators focused heavily on continuity for critical commodities during the conflict. AD Ports said its redeployment strategy prioritized the movement of food, medicines, strategic reserves, and other essential inputs, supported by warehousing and storage capacity.

“The conflict didn’t create empty shelves in the UAE, but it did show why essential-goods storage matters,” Talmatchi tells us. “Despite the challenges, there were no meaningful disruptions to the supply of essential goods, and consumers did not experience shortages or empty supermarket shelves,” he argues. “Most occupiers were able to maintain business continuity without requiring major changes to their operational footprint — highlighting the maturity and competitiveness of the UAE logistics market,” Talmatchi adds.