Demand for industrial and logistics space in Dubai dipped by nearly a third y-o-y to 11.5 mn sq ft, as supply limitations and high rents dampened demand, according to Knight Frank’s Dubai and Abu Dhabi Industrial and Logistics Markets Review (pdf). This follows a record 2024, which saw demand for 40.6 mn sq ft in industrial and logistics space throughout the year.

The combination of increased rents and limited supply led many occupants to stay in their existing facilities and delay their expansion plans by two to four years, when more supply is set to come online, the report said. Rents in Al Quoz were still the highest across the emirate, with grade A rents coming in at AED 85 per sq ft — up 31% y-o-y. Dubai Investments Park follows with average rents of AED 60 per sq ft, up 33% y-o-y.

Three core sectors continued to dominate demand in Dubai, with logistics accounting for 27% of required space during 1H 2025. The manufacturing sector was next with 17%, and retail and trading made up 14%.

Over in Abu Dhabi, rents in certain areas saw significant upticks. Kezad Mussafah recorded average price rises of 57% y-o-y to AED 500 per sqm, while Abu Dhabi Airports Freezone held the top spot with AED 625 per sqm.

Tight market conditions in Dubai and Abu Dhabi are prompting firms to look to northern emirates like Umm Al Quwain instead — though perhaps this will not be a safe option for long, with rents there climbing 40% y-o-y on average. Firms are also increasingly opting for mid-sized units, which overtook larger spaces to become the most in-demand.

The outlook: Dubai’s supply shortage is expected to continue this year, with only 780k sq ft of new stock expected — almost half of which will come from Radius Group’s planned 355k sq ft development in Dubai Investments Park 2. The medium-term outlook appears more positive, with 7.2 mn sq ft of industrial and logistics space currently under development through 2028. Market analysts expect the market to gradually transition from its current landlord-favorable conditions to a more balanced environment.

What they said: “While the current tapering in demand reflects a recalibration after an extraordinary growth phase, the structural drivers for the sector remain intact,” the report said. “We expect demand to remain resilient, albeit more selective, in the coming quarters as the market adjusts to a new equilibrium, underpinned by a shortage of stock.”

Two major projects are helping ease the 2026 pipeline, with the 550k sq ft Terralogix Phase 1 scheduled for completion in 3Q 2026, and Aldar and DP World’s joint National Industries Park development set to add 1.6 mn sq ft from mid-2026.

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