In case you have a plan to store, manufacture, pack or assemble some items, you will need to rent a warehouse to be able to do so. What options you will have to choose from, what general information you should know and what terms and conditions of rent to expect, we will discuss it all in this specific chapter. And even though you might not need a warehouse right now, sooner or later you start searching for one, especially, if you are engaged in trading business, that starts growing exponentially.
As in the case with physical office space, your warehouse shall be located in the same area, where your company is registered. This means, a free zone company is allowed to rent warehousing facilities in the free zone of its registration only, while mainland/local company can have a warehouse anywhere in the mainland area (outside of the free zones) of that emirate, where the company is incorporated.
This is where flexi-desk differs from simple registered address. A flexi-desk is a real physical place for you to come, sit and operate from. Whereas, a registered address is just address, with no office facilities assigned. In this case the work station is not provided and you cannot come and stay to work in a particular place. Generally, the purpose of a registered address is just to give an address that can be mentioned on your license and to allow for the company license to be issued. What is also important to mention is that registered address is provided only with those set-up packages, where investor will not need to apply for any visas (for example you currently work in a UAE company and you do not require a visa from your own company). As such, a company with registered address only cannot apply for resident visas and, therefore, cannot employ anyone.
Many entrepreneurs ask which option is better for business: a registered address or a flexi desk? Well, it depends on your initial finances and your business model. Cost-wise, flexi-desks are the more expensive option. This is because of the physical facilities they provide: access to a desk in a business center, which has internet, phones, utilities, post and so on.
If you are determined to be based in a free zone, you shall be aware that not all free zones in the UAE offer or have warehousing facilities. Why should you know it? Most trading companies in the UAE start small, just renting a flexi-desk facility for the purpose of company registration at the start. As companies grow, the need for warehouse rent arises, and this is when you may learn that you need to shift your operations to a different free zone, offering that much needed warehousing facilities, because your free zone does not offer them. In light of this, do your homework in advance and conduct respective research on the free zone of your preference. You need to make sure that there are warehouses available there.
Now that we’ve set flexi-desk aside from registered address, lets weigh up some of the advantages and disadvantages of leasing a flexi-desk.
While many free zones offer warehouses, you shall bear in mind that availability of these warehouses constantly changes and might be sometimes very limited due to the high demand. In this event, you might even need to put your name on the waiting list. It is also advisable to book a warehouse in advance, which guarantees you that by a specific date you will have a warehouse available for lease. This is usually associated with a 5 to 7% booking charge and the amount can be later offset against the rental payment.
A second advantage is the facilities they provide that we’ve talked about – internet, phones and a workspace. In some instances, business centers will give you access to meeting rooms and even videoconference equipment so it means you can immediately start your operations and even meet clients there.
Different free zones have different range of warehouses in terms of size. Let’s have a look at examples. Umm Al Quwain Free Zone has warehouses as small as 100 sq. m. The smallest size of warehouses in former RAK FTZ, or RAKEZ now, is 200 sq.m. Hamriyah Free Zone in Sharjah offers warehouses ranging from 275 sq.m. to 609 sq.m. Dubai South has warehouses of 770 / 1,540 and 2,321 sq m in size. In general, small warehouses are more typical of free zones in the northern emirates, while such Dubai free zones as JAFZA and DAFZA offer bigger warehouses. If you are looking for a size of 5 000 sq.m. or above, you will either have to build your own warehouse, or you might be allowed to combine several warehouses into a single one. Mainland generally offers a whole array of warehouses, from small to large ones. As such, as you start your business, you need to consider, where you will be able to rent a small warehouse first and how to move later to a larger one.
A standard warehouse often comes with a small office area in it as well as with a pantry. If no one was renting facilities before you, you might need to build an internal office on your own, obtaining all relevant approvals. Additionally, most of the time air conditions need to be installed separately
There can also be some time-costs associated with flexi-desks. The cost-friendly ones are typically located away from popular residential areas, meaning you may have to drive some distance to get there each time. If you are moving to the UAE to set up your business, this could be very expensive in the early stages without a UAE driver’s license.
In case you plan to trade with food items, you will need to have your warehouse equipped properly. Almost all of the warehouses in the UAE do not come with equipment and they are not cold storage areas too. It is a common practice to take care of the makeover independently by renting a plain warehousing facility and installing freezers, fridges and isolating the area.
If you have been considering renting a cold storage space in the logistic center, here are the facts you should know in advance. Logistic center provides storage and distributions services. Space you will rent there will not allow you to register a company. Additionally, you will not be allowed to operate from the rented space. You can visit facility to check the stock or for other administrative purposes, but to stay in the facility whole day and to coordinate deliveries from there during normal working hours you will not be allowed. Therefore, if you were under impression that by renting a small space in a logistic center you will be able to register a company and work from there, your assumptions and understanding were unfortunately wrong. You can definitely use storage services of third parties, but your company will need to have its own registered address, which can be a flexi-desk, a physical office, an office in a serviced business center or, finally, a warehouse.
Also you should know, that, in case your company rents a warehouse, there is no need for further rent of an additional office space. The address of your warehouse will become the official address mentioned on the license of the company and it is sufficient to have just it to register a company. If you need an office, as mentioned already, you can have it constructed inside the warehouse.
What are the general terms of renting a warehouse? The practice is very similar to rent of a physical office space. You would need to pay the rent for the whole year in advance in one installment/one cheque or in two or three installments. In addition to rent, you would need to pay the security deposit and real estate broker’s fees, if you are not renting directly from the landlord. Other expenses to consider are security deposits for connecting utilities and various administrative charges to obtain relevant pre-approvals. You may also want to insure the leased warehouse against possible damages to the property and the stock, you are going to keep there.
We tried to summarize all information you need to know about renting a warehouse in the UAE and we hope you found it helpful. Now that you know about various options for rent for your company you may choose from, we will discuss what you must be aware of and consider, when signing lease agreements for the commercial property.
If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.
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