Dublin’s industrial and logistics market take-up reached 1.3 million sq ft in the third quarter, more than double that achieved in Q3 2021, according to a new report from property advisor, Savills Ireland.
The large average deal size of 54,000 sq ft drove take-up, more the double the Q3 five-year average of 26,000 sq ft. This is linked to a large number of big-box deals, with deals greater than 50,000 sq ft accounting for 79% of take-up.
The logistics sector contributed 81% of take-up. Third-party logistics (3PLs) accounted for the majority with 74% of take-up while First-party logistics equated to 7%. The industrial sector accounted for 19%.
Meanwhile, the vacancy rate increased from 1.0% to 1.4%, directly impacted by the number of vacant legacy units, with only six out of the 37 vacant units being built after 2000. The increase in the availability of legacy stock and current unit specifications sought after by the market presents an issue of suitable supply. Occupiers do not wish to refit older stock and have additional construction carried out while material prices have increased significantly. The addition of newer units is likely to slow the absorption of legacy stock, explaining why vacancy has risen despite ample market demand.
Located near Dublin Airport, Quantum Logistics Park saw pre-lets from two global logistics firms this quarter. In the largest deal of the quarter, and indeed the year so far, was the pre-letting of 206,000 sq ft at Unit 1 to DHL. Meanwhile, integrated logistics firm Maersk pre-let 178,100 sq ft at Unit 3 in what was the quarter’s second largest deal.
In addition, the firm pre-let the 73,800 sq ft Unit 4, bringing their total footprint in Quantum Logistics Park to 251,900 sq ft. In the third-largest deal, US-headquartered Iron Mountain signed for 161,700 sq ft at the newly completed Unit Q, Aerodrome Business Park. The organisation provides storage and management solutions for information and records. Another pre-let accounted for the fourth-largest deal and was also taken by a global logistics firm. UPS signed for 91,500 sq ft at Unit 8, Horizon Logistics Park, which is due to be completed by the end of the year.
Occupiers are seeking large, modern, energy-efficient units to establish strong footholds in the Irish market, while simultaneously expressing concern over rising energy costs and weakened consumer sentiment. The inclination to these assets is also driven by the greater macroeconomic context, whereby Ireland, according to the European Commission, is forecast grow by 3.3% in 2023. The upward trend seen in prime rents reflects this, as prime rents remain at €11.75 psf and €9.00 psf for secondary.
Jarlath Lynn, Director of Industrial and Logistics, commented: “The activity in the Dublin Industrial and Logistics market continues to be strong, as firms seek to establish a larger foothold in the Irish market amidst its growing economy. While there are concerns surrounding inflation and weakening consumer sentiment, the market has shown a continued and growing interest in large, high-quality units to expand operations within Ireland. The market is set to end the year positively with 1.7 million sq ft of stock currently reserved, with the current demand-supply unlikely to ease given the undersupply of these larger, high-quality, modern units. This is reflected in our view that prime rents will continue in an upward trajectory.”
“Energy costs are going to rise this winter season, putting stress on businesses that rely on stable energy prices and that are involved in energy-intensive processes. This concern, combined with rising material costs of construction, will likely incentivise firms to seek units already under construction and that are of high energy efficient quality to help navigate these concerns for the future”
Read the full report here: https://pdf.euro.savills.co.uk/ireland-research/market-in-minutes/dublin-ind-q3-2022-final.pdf