Dubai warehouse demand stays strong despite Strait of Hormuz disruption as businesses rethink supply chains
Dubai recorded 12.3 million sq ft of industrial and logistics demand in H1 2026 as businesses adapted supply chains despite regional disruption.
Businesses operating in the UAE are reshaping their supply chains following disruption to shipping through the Strait of Hormuz, even as demand for industrial and logistics space in Dubai continued to grow during the first half of 2026.
According to Knight Frank’s UAE Industrial and Logistics Market Review – H1 2026, Dubai recorded 12.3 million sq ft of new industrial and logistics requirements during the first six months of the year, up from 11.5 million sq ft in the same period of 2025.
While activity remained strong in January and February, Knight Frank said the start of the regional conflict slowed decision-making from March onwards as some occupiers postponed expansion plans while reassessing costs, supply chains and logistics strategies.
Knight Frank said disruption to shipping through the Strait of Hormuz has prompted companies to review how they move goods across the region.
Some businesses are making greater use of ports including Fujairah, Khor Fakkan and Salalah before transporting cargo by road into Dubai and Abu Dhabi.
Dubai industrial real estate
Demand for air freight has also increased, particularly among businesses moving high-value or time-sensitive goods.
Faisal Durrani, Partner – Head of Research, MENA, said: “Key for the sector in the UAE has been the shipping disruption through the Strait of Hormuz, which has sharpened the focus on the creation of alternative logistics and shipping solutions, culminating most recently in DP World’s announcement of a partnership with the Port of Fujairah to develop two deep water ports on the UAE’s east coast.
“Rental performance is becoming increasingly fragmented across the UAE’s industrial and logistics markets. This reflects a market where occupiers are more selective and where location, specification and value are playing a greater role in determining rental performance. This divergence shows that occupiers are becoming more sensitive to location, building quality and value, with rental performance increasingly determined by the individual characteristics of each submarket.”
Manufacturing and industrial businesses accounted for 35.1 per cent of all industrial and logistics requirements in Dubai during the first half of 2026.
Logistics occupiers represented a further 15.5 per cent, meaning the two sectors generated around half of total demand.
Knight Frank also found growing demand for larger facilities.
Rental growth varies across the UAE
Warehouses between 10,001 and 50,000 sq ft represented 35.5 per cent of requirements, while facilities between 50,001 and 100,000 sq ft accounted for 32.2 per cent.
Demand for warehouses larger than 100,000 sq ft rose sharply to 27 per cent, compared with 7.8 per cent during the second half of 2025.
Adam Wynne MRICS, Partner – Head of Commercial Agency, UAE, said: “The 12.3 million sq ft of new requirements recorded during the first half of the year demonstrates that the market’s underlying fundamentals remain strong. However, occupiers are becoming more selective, prioritising efficient, modern facilities in strategic locations while carefully assessing costs and the wider impact of regional disruption.
“The increase in requirements for facilities exceeding 100,000 sq ft also demonstrates that demand from major manufacturers and logistics operators remains resilient, underscoring the resilience and attractiveness of the UAE’s base fundamentals for industrial and logistics operators, despite the ongoing regional hostilities.”
Knight Frank said rental performance became increasingly mixed across the UAE during the first half of 2026.
In Dubai
- Al Quoz remained the city’s most expensive industrial location, with Grade A rents averaging AED90 ($24.50) per sq ft, up 6 per cent year-on-year
- Dubai South recorded the strongest rental growth, rising 22 per cent to AED55 ($14.97) per sq ft
- Dubai Industrial City recorded rental growth of 16 per cent
- KEZAD Mussafah (ICAD) remained the emirate’s most expensive industrial and logistics submarket, with rents increasing 15 per cent year-on-year to AED630 ($171.54) per sq m
- Al Markaz recorded rental growth of 7 per cent to AED400 ($108.92) per sq m
Umm Al Thuoob in Umm Al Quwain accounted for 5.2 million sq ft, contributing to an 18.5 per cent decline in rents over the past year.
Supply begins to rebalance
Knight Frank said the industrial and logistics market is gradually moving towards a healthier balance between supply and demand.
New warehouse completions are expected to remain concentrated during 2026 before moderating in 2027 and 2028.
The consultancy said strong pre-leasing activity and longer construction timelines are expected to limit the amount of immediately available Grade A space.
It also expects industrial rents in Dubai to find a floor within the next 12 months, with prime rents potentially stabilising during the second half of 2027, assuming the regional conflict has concluded by then.
Maxim Talmatchi MRICS, Partner – Head of Industrial and Logistics, ME, said: “Beneath the monthly swings, the demand-supply imbalance that has defined the sector since 2021 is starting to correct. Newly completed stock is giving occupiers real choice for the first time in three years. More sellers are coming to market and rental data is pointing to a broad-based moderation in headline lease rates for the first time in this cycle. This means tenants are now very much in the driving seat a position they have not enjoyed since 2021.
“Abu Dhabi, we believe will see rents firming, supporting by near full-occupancy in key locations and land take-up underpinned by real, rather than speculative, demand. The Northern Emirates will trade on value, with Umm Al Quwain consolidating its cost play, while landlords in Sharjah and Ajman may find terms tested as Dubai’s improved availability curbs the recent ‘northern-bound demand’.”
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