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DUBAI-Carrying its well-established globalization strategy into new territory, Denver-based ProLogis plans to develop its first distribution center in the Middle East. The company signed an agreement to design and build a 798,000-sf facility here for the locally based Aramex, one of the world’s leading total transportation solutions providers.

ProLogis is developing the facility in Dubai Logistics City (DLC), a new logistics hub less than 20 minutes from the Port of Jebel Ali, the world’s seventh largest container port, and the future Dubai World Central International Airport. Construction, which has already started, is scheduled to be complete in the second half of 2008.

“We have been investigating business opportunities in this region for more than a year and believe that this new transaction within DLC provides an excellent opportunity for ProLogis to begin its Middle Eastern operations,” says ProLogis chair and CEO Jeff Schwartz. He says Dubai benefits from a centralized location and immediate access to major modes of transport.

According to Melissa Marsden, senior vice president of investor relations and corporate communications for ProLogis, the region is attracting significant foreign direct investment, which has led to increased personal income. This in turn is driving growth in domestic consumption and creating a need for efficient logistics operations. “Over time, we think the Middle East could represent up to $300 million to $400 million of annual development,” she says.

Dubai is in the midst of a remarkable transformation, with more than $300 billion of construction under way or in planning. In 2007 Dubai is expected to see completion of 60,000 new apartments, and in August the government commissioned a new strategic urban-development framework for 2020 because its 2010 goals have already been reached.More than that, says Schwartz, Dubai is quickly becoming a gateway to the Middle East, with DLC set to serve as one of the largest supply chain communities in the world. As Marsden points out, there are more than 535 million people in the Middle East and some two billion people in the larger region that also comprises the Indian subcontinent, Africa and the Commonwealth of Independent States, consisting of nations that made up the eastern half of the former Soviet Union.

DLC is the first phase of a government-backed, 140-square-kilometer, master-planned urban community called Dubai World Central. The US$33-billion project, which is under construction 40 kilometers from the existing Dubai International Airport, will eventually comprise one of the world’s largest, integrated multi-modal logistics platforms.

Joseph Ghazal, senior vice president for ProLogis in the Middle East, says the Aramex agreement marks a first step in the development of the company’s Middle East platform. “We expect to grow our business by securing build-to-suit and fee development agreements with leading companies, many of which are multi-national, and through strategic land transactions in key markets throughout the United Arab Emirates,” he explains.

Marsden tells PJ that many of ProLogis’ major 3PL customers want to establish a presence in the market, but adds that demand for modern facilities is growing among local companies as well. However, she continues, at present there is a market only for build-to-suit and fee projects rather than spec development. But she expects demand for general inventory development will grow over time as major logistics companies that are accustomed to a reliable supply of product begin expanding their presence.

“Given the global nature of our customer relationships, we believe further expansion into this region would be consistent with our core business strategy,” she says. “However, it is too soon to speculate on long-term plans in terms of additional development.”

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