Free Zones in the UAE date back to 1985, with the establishment of Jebel Ali Free Zone in Dubai. As of today, there are over 40 free zone areas across the UAE, offering international businesses incentives such as 100% foreign ownership, tax exemptions, and flexible regulations. From dynamic commercial hubs like DIFC to the sustainable community of Masdar City, each area has contributed to the economic growth of the UAE, as well as increasing demand for commercial properties.
The Rise
JAFZA, or Jebel Ali Free Zone Area, is the first and most famous FZA in the UAE. Since its opening in 1985, the area has grown further to accommodate thousands of companies from 150+ countries, notably including the headquarters of the world-renowned LVMH, creating various job opportunities and creating high demand for commercial spaces.
Masdar City, Abu Dhabi, photo credits to masdarcity.ae
Abu Dhabi boasts 5 different free zone areas, located in Masdar City, Abu Dhabi Airport Free Zone (ADAFZ), Abu Dhabi Global Market (ADGM), Khalifa Industrial Zone (KIZAD) and twofour54. Each location is dedicated to various business sectors. For instance, Masdar City is a global leader in sustainability and renewable energy and the headquarters of Siemens Middle East.
Foreign Direct Investment
Establishing a company in the free zone area comes with a set of advantages, making the UAE a desirable location for doing business. The advantages include 100% foreign ownership, tax incentives, strategic locations (notably near ports and airports) as well as a regulated framework.
Thanks to the ease of doing business, Foreign Direct Investment (FDI) has been gradually increasing. The World Investment Report 2024 by the United Nations Conference on Trade and Development (UNCTAD) reveals that foreign direct investment (FDI) inflows to the UAE reached USD 30.688 billion in 2023, up from USD 22.737 billion in 2022, positioning the country as the second-largest recipient of FDI globally.
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Supply Shortage Amidst High Demand
A report posted by Cushman & Wakefield Core and reported by the newsletter, Zawya, reveals a 13% year-on-year increase in Dubai’s warehousing and industrial rental rates, driven by robust demand. Notably, Dubai Industrial Park (DIP) and Dubai Industrial City experienced the sharpest rental hikes of 25% and 21%, respectively. Meanwhile, Abu Dhabi’s market showed a steady but moderate rise, with areas like Mussafah and ICAD seeing an average year-on-year increase of 5% citywide.
As a result, a significant imbalance between demand and supply emerged, with the demand for warehousing and industrial facilities consistently surpassing available inventory. This has naturally resulted in rising rental prices. Key drivers of this demand include the growth of the e-commerce and logistics sectors, the expansion of oil and gas companies, and the entry of new players into the market.
Key Developments Shaping the Market
Aldar Properties, the leading Abu Dhabi-government owned developer, is set to begin construction on a new logistics park within DP World’s 21-square-kilometer National Industries Park (NIP) in Dubai in Q4 2024. Spanning 1.55 million square feet, the grade-A logistics park will address Dubai’s growing demand for warehousing facilities. It will feature three modular buildings, adaptable for single or multi-tenancy, with flexible unit sizes to accommodate all needs.
Furthermore, Aldar has teamed up with Expo City Dubai in a joint-venture to develop a USD 475 million mixed-use development near Al Maktoum International Airport and the Dubai Exhibition Centre (DEC). The joint venture will deliver a six-building project featuring residential, office, and retail spaces, with a combined gross floor area of 103,000 square meters.
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The Outlook
As international companies are more encouraged to do business in the country’s free zones, the UAE’s industrial and warehousing sector will undergo significant changes. With demand for facilities and commercial spaces consistently surpassing supply, rental rates are expected to rise steadily, attracting increased attention from investors. In addition, future growth in the sector will be bolstered by major infrastructure developments, including the Etihad Railway and the expansion of Al Maktoum International Airport. These projects are set to enhance connectivity across the region, driving greater demand for logistics and warehousing spaces.
