Abu Dhabi incentives tipped to relieve squeeze on factory space

Analysts have welcomed Abu Dhabi’s plan to launch an incentives package aimed at the industrial sector, including discounts on electricity bills and land purchases.

Mohamed Ali Al Shorafa Al Hammadi, chairman of the Abu Dhabi Department of Economic Development, unveiled the package last week, ahead of its launch in July.

The scheme also includes a reduction in the number of licensing requirements for setting up in Abu Dhabi, from around 26,000 to 6,000.

“We are getting to a stage where we are seeing shortages within the industrial and logistics segment of the market within Abu Dhabi, and actually within the wider UAE,” Taimur Khan, head of research at real estate advisory firm CBRE, told AGBI.

“So, initiatives by the Abu Dhabi government, which will help aid in the development of new industrial and logistics spaces, are very welcome.”

Abu Dhabi’s plans are part of a wider strategy announced last year by the UAE Ministry of Industry and Advanced Technology. The industrial sector currently contributes 133 billion dirhams ($36.2 billion) to the UAE’s GDP and the strategy, named Operation 300bn, aims to raise this to 300 billion dirhams by 2031.

Abu Dhabi’s industrial sector is currently worth around 85 billion dirhams, with around 602 products manufactured in 111 factories.

“A limited supply of pre-built warehousing and light industrial space across key areas, such as Mussafah and ICAD, is currently a challenge, with firms often considering less centrally located alternatives to meet requirements,” said Chris Hobden, head of strategic consultancy at real estate firm Chestertons MENA.

“Abu Dhabi’s proactive support for industrial activities, including electricity cost subsidies and the streamlining of licensing requirements, has been fundamental in supporting the sector’s growth.”

A report published last year by real estate firm Knight Frank said Abu Dhabi’s industrial sector needed about 63,0000 square metres of new space. The report pointed out that the fast-growing e-commerce retail sector had increased demand for warehouses.

The UAE e-commerce sector was valued at $3.9 billion in 2020 and the Dubai Chamber of Commerce and Industry estimates that this will grow to $8 billion by 2025.

The pandemic was also a catalyst for the growth of the food delivery sector, which led to a boom in demand for satellite kitchens, according to the Knight Frank report.

In August last year, the UAE was ranked the most competitive industrial sector in the Arab world and the 30th worldwide globally, according to the 2021 United Nation’s Industrial Organisation’s Competitive Industrial Performance Index report, which tracked 152 countries. The UAE has moved up five places since 2020.

This article was originally published in Arabian Gulf Business Insight