Demand for industrial, logistics space in Dubai rises 7% y-o-y 1H amid regional headwinds

Demand for industrial and logistics space in Dubai rose 7% y-o-y to 12.3 mn sq ft during 1H 2026, up from 11.5 mn sq ft the same period last year, as new buildings give tenants more options and help stabilize the market, according to a Knight Frank press release (pdf).

Manufacturing and logistics took the lion’s share: Manufacturing and industry emerged as Dubai’s primary demand drivers during 1H 2026, accounting for 35.1% of total demand. Meanwhile, logistics occupiers represented 15.5%, bringing the combined total of both sectors to over half of all demand.

Tenants were also looking for larger footprints: Facilities exceeding 100k sq ft captured 27% of requirements, marking a 7.8% rise from 2H 2025, while units between 10k and 50k sq ft made up 35.5%, and spaces between 50k and 100k sq ft accounted for 32.2%.

Activity was hit amid regional headwinds: While activity was strong in January and February, decision-making slowed from March onward due to regional conflict and shipping disruptions through the Strait of Hormuz, prompting occupiers to reassess supply chains, expansion plans, and costs.

Dubai’s industrial hubs saw a rise in rental growth rates: Al Quoz remained Dubai’s most expensive industrial spot, with Grade A rents rising 6% y-o-y to average AED 90 per sq ft. Meanwhile, Dubai South saw the highest annual rental growth across the emirate, rising 22% y-o-y to AED 55 per sq ft. Dubai Industrial City rents climbed 16% y-o-y.

It’s a similar story over in Abu Dhabi: Kezad Mussafah (ICAD) was the most expensive submarket in Abu Dhabi, with average rents climbing 15% y-o-y to AED 630 per sq m, followed by Al Markaz at AED 400 per sq m (up 7% y-o-y).

However, Northern Emirates moved the opposite way, with over 10 mn sq ft of marketed warehouse space opened up across the Northern Emirates — including 5.2 mn sq ft in Umm Al Quwain — cementing downward pressure on local rents, which fell 18.5% over the past year. This reverses last year’s trend where the first half of last year saw displacement drive a 40% rise in local industrial rents in the Northern Emirates due to a supply crunch in Dubai and Abu Dhabi.

The outlook: Dubai industrial rents are expected to stabilize over the next 12 months into 2H 2027, provided regional conflict eases. Also, the upcoming supply of industrial and logistics space is largely expected to land this year, after which new project completions are anticipated to see a slowdown throughout 2027 and 2028. Meanwhile, slow construction and high pre-leasing will likely keep top-tier space scarce for now.