Understand Dubai's Economic Zones Before Signing A Commercial Lease

Do a thorough study of licensing procedures and zoning regulations.

In Trends 5, I ended my article titled “Getting Ready For Business” with a section about licenses and zoning. In this issue, it is my intent to expand on this and help my readers recognize the importance of understanding why one must carefully analyze different zones before choosing a commercial location.

Before you make any property-related decisions, it is vital that you study the market. Understanding the Dubai real estate market will help ascertain the location where you want to buy or rent and which zone is right for you.

Finding Your Best Location

Whether you are looking for a 50,000 square ft office in Dubai International Financial Centre (DIFC), a 25,000 square foot warehouse compound in Al Quoz, or just a 1,000 square foot retail space in Dubai Silicon Oasis, it’s crucial to partake in a thoughtful, organised and data-driven due diligence process before you begin seeking spaces. This will be critical to your success in finding the right location. Knowledge is power and hopefully, my article will give you some insight on how things work and what to do when sourcing spaces.

More often than not, I receive calls from clients who are completely unaware of the commercial market and unprepared, which makes my job more difficult each day.

By definition, brokers and agents are certified and licensed to negotiate sales and lease agreements and manage the documentation required for closing real estate transactions. If commercial clients came into the market having the right information, then brokers like myself and others would be able to do our job better and be more efficient with our time.

One of the most important things to remember is that Dubai works on zones. We have a DED zone which is an onshore zone and then more than 20 free zones classified as offshore, all having different rules and regulations which commercial clients have to abide by.

Understanding Rules & Regulations

To give some insight and the importance of knowing why
your zones and rules and regulations are important, I will
share some examples:

In one instance, I received an inquiry where the client was specific about the DMCC free zone, said they wanted 3,000 square feet and 44 visas and this was not negotiable. Had the client done their due diligence, they would be aware that this requirement was not possible as per the DMCC rules. There is one visa allowed per 90 sq ft of leased space, so having 44 visas was not possible and the client would need to increase his size to a minimum of 3,960 sq ft in order to accommodate the visa requirement.

In another instance, I had a restaurant client come to me to lease a licensed venue, but they were completely unaware of the fact that they needed to apply for a trade name reservation and initial approval in order to have a legal and binding contract initiated. The client insisted that all they needed to do was wire the funds and draw up a contract using their passport details. After the information I provided, they did their research and then applied with all the necessary paperwork and three months later, we were able to finalize. Had they done their homework from the start, we could have saved a lot of time and energy on sourcing their restaurant venue.

Another instance was when the managing director of a residential real estate agency called me and said they had a client interested in leasing a full floor in Media City. I asked which license her client was holding (as this would determine which buildings I chose to show her); she responded abruptly: “How does it matter? Just show me some floors.” Again, if she had done her due diligence, she would know that Media City accommodates both DED and Media City (which falls under the TECOM free zone) licenses while only certain buildings allow certain licenses in this zone.

Having practiced commercial real estate since early 2013, I could give you hundreds of examples like this and while I am happy to assist every person who contacts me on an individual basis, I also think it is important to focus my article on educating readers and providing some insight into this vast, complex yet beautiful world of commercial real estate.

Need to know

When considering a commercial lease or purchase in Dubai, it is important to understand your licensing procedures and zoning options and regulations and why zones were established, to begin with. Given that the UAE has always been the epicenter of the Gulf’s economic ascendancy and with the intent to remain so, the government took crucial steps to ensure that with the introduction of free zones, it would set an overall platform where businesses could easily enter and flourish while being ruled by their own authority, rules, and regulations.

With its entrepreneurial culture and booming economy, Dubai is one of the best places in the Gulf to do business.

Therefore, it is of utmost importance to remember that the two license categories in Dubai are onshore and offshore as well as to know what is associated with each zone.

An onshore company is also known as mainland and licensed by the Department of Economic Development (DED) and has a Limited Liability Company (LLC) structure. Having a UAE national as a local partner or local service agent is mandatory in all mainland commercial licenses, with 51 percent shares held by a UAE national and 49 percent by the expat partner. DED licenses can only operate within certain areas in Dubai, which I classify as “onshore zones”. Some examples of these areas are Jumeirah, Al Quoz, Business Bay, Barsha Heights, Downtown Dubai, Dubai Investment Park (DIP), Dubai Marina and Sustainable City, to name a few.

An offshore company in Dubai will operate on a free zone license, which is 100 percent owned by the expat partner, strictly administered by their own authority. Some free zones offer tax concessions and customs duty benefits to expatriate investors, offering licenses based on the specialty and sector. You have the option to choose the best trade license and set up in that specific jurisdiction. Once you have established which zone you would like to operate from, we can then purchase or lease the right commercial
space.

Free Zones in Dubai

To date, there are more than 20 free zones in Dubai. Some would be inclined to consider the 11 business communities which fall under Tecom as individual zones, thus taking that number to an approximate 30 zones. I will go over some of the zones below. I am giving a basic outline of each, but I highly advise you to check with each authority, as at times special permissions are granted to work within a zone. Like the shifting desert dunes, rules and regulations can often be modified.

Let’s start with Tecom as this free zone giant houses the most zones, a total of 11 thus far, which provide for over 5,600 businesses ranging from major multinationals to local SMEs and startups and represents a workforce of over 90,000 individuals.

Dubai Media City is a media business community that is home to regional and international companies.

Dubai Studio City provides facilities and services to companies across the broadcasting, TV, and film production industries.

Dubai Science Park, formerly known as DuBiotech, is a business park that facilitates the growth of energy and environment businesses in the Middle East.

Dubai Design District (D3) is home to creative thinkers. It provides a platform to showcase this to a global audience.

Dubai Internet City is a business and technology community.

Dubai Knowledge Park is a community of training institutes and recruitment firms.

Dubai Outsource City is dedicated to the growth and development of the region’s outsourcing, shared services, and business process outsourcing centers.

Dubai Production City is a business community for printing, publishing and advanced production.

Dubai International Academic City houses multi-tiered academic institutions committed to developing the region.

Dubai Industrial Park is a manufacturing and logistics destination which caters to the medium manufacturing sectors.

Emirates Towers Business Park is located in the heart of the region’s business hub and offers premium low and high-rise office towers.

Each zone is specific to certain business activities, so I continue to stress the importance of doing your due diligence, including a comprehensive market study on each location before applying for a license pre-approval and/or executing a purchase. The majority of zones in Dubai operate in a specific area and house that one specific zone and cater to business services relative to that particular zone. Below, I will share information on some of the equally important free zones in Dubai, as well as list additional zones.

Jebel Ali Free Zone (JAFZA) drives the growth of vehicle sales, automotive and spare parts in the MENA region, as well as logistics, food and agricultural commodities, retail and e-commerce, and petrochemicals. JAFZA houses over 7,500 companies, including nearly 100 Global Fortune and 500 enterprises.

Dubai Multi Commodities Centre (DMCC) has also been known as the Jumeirah Lakes Towers free zone, as this zone is based in the JLT district and thus the DMCC license is operational here. This zone is specific for global commodities trading, with over 15,000 established businesses from a wide range of industries as diverse as energy and financial services to diamonds, gold, and metals.

Dubai Healthcare City is the destination of world-class healthcare and is a free zone committed to creating a health and wellness destination. Governed by the DHCA, Dubai Healthcare Authority has over 160 clinical partners, including hospitals, outpatient medical centers and diagnostic laboratories with close to 200 retail and non-clinical facilities that service this zone.

Dubai International Financial Centre (DIFC) is one of the world’s main financial centers and the leading financial hub for the Middle East, Africa, and the South Asia region. The DIFC has its own independent regulatory and judicial system, along with a global financial exchange. With over 2,000 active registered firms licensed under the DIFC and over 23,000 business professionals, it also offers an abundance of retail outlets and 5-star restaurants and hotels within the zone.

At this point in my article, you should start to relate the business activity to the name of the specific zone, which will make it all the more easier to narrow down your choice and specific license to be issued. Each zone has its own website and contacting the authorities to ask about the rules, regulations, and procedures should now be at the top of your list. It’s a simple case of narrowing down the zones based on the criteria for you and your business-related activity.

Some additional zones are as follows:

Dubai Airport Free Zone is an ideal base to do business in the Middle East.
Dubai Car and Automotive City Free Zone is one of the largest of its kind with a whopping 8 million square feet.
Gold and Diamond Park specializes in fine jewelry.
Dubai Logistics City is one of six clustered zones underway at Dubai World Central.
Dubai Silicon Oasis is an integrated free zone technology park.
Dubai Techno Park, a member of the Economic Zone.
International Media Production Zone has extensive knowledge in construction, retail, logistics and IT.
Economic Zones World is a free zone committed to the ownership, operation management and development of free trade zones and industrial parks under the Dubai World Group.

I will end my article with two of my favorite words: “due diligence”. When commercial clients come to me fully prepared with a concept, company profile, trade name reservation and initial approval on the dedicated zone, I have rarely found any setbacks in brokering these real estate transactions. In an attempt to mitigate risk, research zones and select an appropriate one based on your business module while applying for the correct license. Also, understand the limitations of the said license. This simple act can save you time and ultimately money.