93% Increase in Take-up of Industrial and Logistics Property in Dublin

The take-up of industrial and logistics space in Dublin reached 834,000 sq. ft. in the first quarter of this year, according to new data from property advisor, Savills Ireland – an increase of 93% compared to Q1 2021, and 33% higher than the average Q1 witnessed over the last five years.

Driving this growth was an above-average number of large deals; four units of greater than 50,000 sq ft signed, two of which were greater than 100,000 sq ft. There was also a decline in small deals between 5,000 and 10,000 sq ft, with just eight deals for units of this size. With a high volume of large deals and a below-average number of small deals, the quarterly average deal size increased to 41,700 sq ft, compared to the five-year quarterly average of 31,600 sq ft.

The largest deal of the quarter was a pre-let of 200,000 sq ft in Northwest Logistics Park to a confidential international occupier. DB Schenker’s – a leading German supply chain management and logistics solutions firm – pre-letting of 134,000 sq ft in Unit D, Mountpark Baldonnell, was the second-largest deal of the quarter. It represents their fifth unit in the Mountpark Campus and follows on from their acquisition of a site with a 219,000 unit under-construction in Kildare last year, illustrating the growth by firms in this sector. Q1’s third-largest deal was for 88,000 sq ft at 605 Greenogue Business Park to an Asian e-commerce company. Other notable deals included Fastway’s leasing of 81,000 sq ft in Building One Greenogue Logistics Park and Schuh’s lease of 49,000 sq ft in Unit 613, Northwest Business Park.

John Ring, Director of Research, commented: “Schuh’s lease in Northwest Business Park is particularly noteworthy the British retailer is taking logistics space in response to Brexit, with the firm citing rising trade costs as their motivation for opening the new distribution centre. Indeed, trade tensions saw imports from Britain decline by 13% in 2021, with businesses suffering from continued delays and uncertainty. Retailers that choose to expand their logistics capabilities in Ireland and mitigate these issues will have to compete for already limited stock, with a vacancy rate of approximately 1% prevailing in the market.”

Jarlath Lynn, Director of Industrial and Logistics added “Take-up continues to be constrained by an absence of suitable accommodation for occupiers. The top four deals, which accounted for 61% of take-up in Q1, were all recently completed or pre-let stock. This has become an increasing trend in the market, with take-up for new stock making up almost half of all take-up in 2021. Potential take-up from new stock is limited in 2022, with 44% of the remaining stock set to complete in this year already pre-let, and a further 25% is reserved. This leaves just 365,000 sq ft across eight units available for the open market. Potential occupiers seeking high-quality accommodation will need to look further up the supply pipeline. With an additional 2.4 million sq ft of space due in 2023, 72% of which is currently available, we may see pre-lets of this stock make up a considerable portion of take-up this year.”

The share of take-up accounted for by sales – as opposed to lettings – fell to 6% in Q1 and follows on from the 14% in 2021, which represented its lowest level on record and down from 66% in 2014. This steady decline is a consequence of the shortage of space across the market. Traditionally, selling rather than letting was the easier route for owners to dispose of a vacant holding. Lettings generally took more time and involved greater risk. However, the progressive tightening of available space witnessed in recent years has changed this. Owners are now leasing vacant space and selling it as an investment, thus realising a higher end value. In effect, they are opting to take on the tenancy risk themselves, leasing the assets to the large pool of occupiers who need space, and then selling on the assets to institutional and private equity funds rather than to owner occupiers. This decline in the share of owner-occupiers is likely to continue because of the depth of demand from investors. Furthermore, occupiers are increasingly willing to take longer leases on assets, helping the stability of income streams and, in turn, opening up the sector to larger pools of capital with €178 million invested in income producing assets in Q1 2022. As a result, with such a weight of capital seeking industrial assets, it’s becoming harder for occupiers to purchase premises for occupation.”