Why you should always do your technical due diligence before you invest in industrial real estate
By Nick Constantine Director – Built Asset Consultancy, RLB in the Middle East
In this article, I will explain how:
- The industrial real estate sector in the UAE and KSA is rapidly growing due to economic diversification, infrastructure investments, and expanding e-commerce and manufacturing,
- This is driving demand for modern logistics and storage facilities, built assets which come with increased technical complexity and risks that require thorough technical due diligence before acquisition.
- Properly conducted technical due diligence enables informed investment decisions, risk identification and operational assurance, making it essential for safeguarding value in the complex industrial real estate sector.
Within the United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA), the industrial sector – including logistics and storage assets – has emerged as one of the most dynamic and attractive real estate and investment classes in the region.
Driven by economic diversification agendas, large-scale infrastructure investment, and rapidly expanding e-commerce and manufacturing bases, demand is rising for modern warehousing, logistics hubs, light industrial facilities and temperature-controlled storage.
However, the same factors driving this growth and which make industrial and logistics assets attractive to investors also increase the technical complexity and risk associated with acquiring these assets.
Industrial properties often rely on highly bespoke building systems and specialist infrastructure, meaning buyers may inherit significant compliance issues, operational constraints or hidden capital expenditure (capex) if technical due diligence is not properly structured and undertaken before acquisition.
What is driving the growth of industrial real estate in the UAE and KSA?
In the UAE, the sector has been buoyed by continued growth in trade, re-exports, and the development of free zones and logistics corridors, particularly around Dubai and Abu Dhabi.
Strategic initiatives to position the UAE as a global logistics gateway, together with world-class ports and airports, have significantly increased demand for industrial and logistics space.
The rise of e-commerce and third-party logistics operators has further accelerated the need for efficient distribution centres with high functional specifications.
Similarly, in KSA, Vision 2030 and the National Industrial Development and Logistics Program have placed logistics and industrial development at the centre of economic transformation. Investments into new industrial cities, logistics zones, and transport infrastructure from ports to rail and road networks, have underpinned a growing occupier base.
These trends have made industrial and logistics real estate a strong, resilient sector for investors in both markets.
Why do industrial built assets pose greater risks for investors?
Unlike conventional office or residential buildings, industrial properties typically incorporate unique and varied plant, equipment and building systems tailored to specific operations.
Automated racking systems, cold storage installations, specialised MEP services, high-specification slabs and enhanced power provisions mean the technical profile of each asset can be highly bespoke.
This uniqueness presents both opportunity and risk. If the existing infrastructure aligns closely with the incoming operator’s needs, it can significantly reduce upfront capital expenditure and accelerate operational ramp-up.
Conversely, if critical systems are undersized, obsolete, non-compliant, or at the end of their useful life, the buyer may inherit substantial and sometimes hidden costs.
In a competitive acquisition environment, there can be pressure to transact quickly, increasing the risk that these issues are not fully understood at the point of purchase.
“For investors and buyers, a properly structured technical due diligence is of critical importance prior to the acquisition of an industrial built asset.”
Heavy operational use accelerates deterioration of industrial assets
Industrial assets also tend to experience heavy and continuous use. High traffic from forklifts and trucks, constant loading and unloading, vibration from machinery, and intensive use of services all contribute to accelerated wear and tear when compared to many other asset types.
This can manifest as slab damage, roof and cladding deterioration, degraded dock levellers, corroded steelwork, or overloaded MEP systems.
Without a structured and independent technical review, such defects may only become apparent after transfer, when they directly impact operations or require immediate rectification.
Operational priorities often lead to deferred maintenance
Compounding this is the way industrial facilities are often managed. In many cases, the primary focus of owners and occupiers is on operational performance, throughput and production efficiency, rather than on the underlying building fabric and long-term maintenance.
Repairs can be reactive rather than planned. Interventions are sometimes undertaken simply to keep operations running rather than to preserve the enduring integrity of the building structure and systems.
Over time, this can result in deferred maintenance, undocumented alterations, or partial fixes that mask deeper issues.
For buyers, this increases the likelihood that material issues – particularly those affecting compliance, asset lifespan, and future capex – only become apparent after completion, when they begin to impact operations or require immediate remediation.
Why is technical due diligence so important before an acquisition?
For investors and buyers, a properly structured technical due diligence (TDD) is of critical importance prior to the acquisition of an industrial built asset.
A robust TDD process should go beyond a basic visual inspection to provide a holistic technical understanding of the asset.
Although each TDD scope is tailored to the client’s requirements and asset typology, it will typically focus around three main scope elements:
1. Review of property documentation
Copies of relevant regulatory approvals, titles, warranties and guarantees, as-built drawings, lease documents, maintenance records and O&M manuals are all typically requested and reviewed. Ideally, these are provided ahead of inspection, providing a surveyor with greater context and understanding of the building and its systems.
2. Property condition inspection
Inspecting and recording the condition of elements including (but not limited to) the structural frame, roof, façades, floor slabs, windows, doors, finishes, drainage systems, MEP systems and landscaping. Attention should be paid to the impact of heavy use, corrosion in coastal or chemically aggressive environments, and the compliance, operational efficiency and remaining life of HVAC, electrical and fire systems.
In addition, important technical attributes such as functional heights, power availability, slab loading capacity, and the presence of specialist plant and equipment may be verified and recorded, as these factors could materially influence asset value and operational viability.
3. Capital expenditure (capex) forecasting
Identifying short, medium and long-term capex needs and aligning them with the buyer’s investment strategy. This includes quantifying costs associated with regulatory compliance, defect remediation, system upgrades and energy-efficiency improvements.
What kind of risks can you identify through technical due diligence?
RLB advises clients across the UAE and KSA on acquisitions of industrial, logistics and storage assets. Over the last six months alone, we have identified more than AED100 million worth of defects and associated remediation and upgrade costs through technical due diligence commissions on industrial assets.
Our findings span a wide range of issues, including:
- Non-compliant fire safety systems
- Insufficient slab specifications for the intended use
- Roof and envelope defects leading to water ingress
- MEP systems at the end of their service life
- Significant deferred maintenance activities
Without a comprehensive technical due diligence process, many of these issues, and their financial and operational implications, may have gone unnoticed at transaction stage, leaving buyers exposed to unexpected costs, operational disruption, and, in some cases, regulatory risk.
“By identifying and quantifying risks and costs upfront, a well-structured technical due diligence process allows buyers to make informed investment decisions, negotiate commercial terms with confidence, and plan capex with clarity.”
Why is technical due diligence an essential tool for investors?
By identifying and quantifying risks and costs upfront, a well-structured technical due diligence process allows buyers to make informed investment decisions, negotiate commercial terms with confidence, and plan capex with clarity.
Most importantly, it verifies whether an industrial asset can safely and reliably support the operational requirements it is being acquired for.
Technical due diligence should not be viewed as a procedural step or tick-box exercise in a transaction process.
In the industrial real estate sector, which is defined by bespoke infrastructure, intensive usage and compliance-critical systems, it is an essential tool for protecting value, ensuring performance, and aligning investments with strategic objectives.
About the author
Nick Constantine
Nick Constantine joined RLB in 2020 as Director of our Built Asset Consultancy and is responsible for the delivery of strategic asset improvement projects.
Working in multi-disciplined project and building consultancies in the UK since 2010, and in the Middle East since 2014, Nick has developed a track record of successfully delivering a wide range of projects with a dedication to improving the quality, performance and safety of built assets in the region.
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