New research from property advisor, Savills Ireland has revealed that 87,318 sqm of industrial & logistics space was taken up in Dublin during Q4 2020, up almost 5% on the same period in 2019.
In total, there were 47 transactions, 68% of which were lettings totalling 67,690 sqm – reflecting the continuing lack of freehold opportunities available on the market.
This brings total take up for 2020 to 276,536 sqm which is down 7% compared with 2019 but is 5.5% above the 10 year average. In addition, an agreement for lease was signed in Q4 for a 60,746 sqm facility at Baldonnell Business Park which will add significantly to take up in 2021 when completed and occupied in the second half of the year. According to Gavin Butler, Director of Industrial & Logistics in Savills, take up in 2020 has been hampered by an all-time low vacancy rate of just 1.8%.
With no supply of speculatively built stock anticipated to come on stream until Q2 2021 and over 35% of the current vacant stock over 30 years old, occupiers are extremely limited in terms of potential options.
Just one new build was delivered to the market in Q4, Unit 635 Northwest Logistics Park, Dublin 15, totalling approx. 9,286 sqm which was built by Park Developments Group and pre-let on a new long term lease.
Interestingly, 91% of all new builds finished since 2016 have been let prior to completion, reflecting the lack of supply of good quality second hand space coming to the market and the preference amongst occupiers to occupy new / modern stock despite the higher rents and longer lease terms required by landlords compared with second hand buildings.
In total, only 26,500 sqm of new space was delivered to the market in 2020, all of which has been let. This reinforces the continued strong levels of demand for high quality logistics space.
Prime rents for new space are in the region of €112.50 per sqm however a rent of €129 per sqm was achieved for the letting of a new build in southwest Dublin in Q4, setting a new benchmark. This rental level, coupled with existing strong levels of demand and the historically low vacancy rate, is likely to drive rental growth further in 2021. In the context of a pandemic, this rental inflation illustrates the strength & resilience of industrial and logistics property sector.
There are nine buildings which total 93,570 sqm currently under construction and due for completion in 2021 across six developments in Dublin, three of which are already committed. Based on current levels of demand and the tailwind expected for further demand for logistics space arising from Brexit, it is anticipated that the majority of this space will be taken up prior to completion.