CBRE Ireland has released figures for the volume of industrial and logistics lettings signed in Dublin during the first nine months of 2018, which shows that after a slow start to the year, bumper take-up occurred in this sector during Q3 2018.
Dublin Industrial & Logistics Take-Up Q3 2017 - Q3 2018
According to Marie Hunt, Executive Director & Head of Research at CBRE in Ireland, “More than 100,000m² of take-up was recorded in the Dublin industrial & logistics market during the third quarter of 2018, bringing total take-up in this sector in the first nine months of 2018 to 210,245m². This is 24% higher than the volume of activity achieved in the first nine months of 2017 demonstrating the impact that new supply is now starting to have on the industrial & logistics sector. There were 39 individual industrial transactions signed in Dublin in Q3 2018 including some pre-lettings”.
64% of the total volume of industrial take-up recorded in Dublin in Q3 2018 comprised lettings (26 transactions) with the remaining 13 of the 39 transactions signed in the period comprising sales. For the nine months of 2018, lettings accounted for 64% of transactional activity in this sector.
Prime industrial rents in Dublin rose quarter-on-quarter and stand at €106 per m² (€9.85 per ft²) at the end of Q3 2018. Prime rents are expected to rise further over the coming months.
Transactional activity in the industrial sector during Q3 2018 was primarily focused on the Dublin South West (N7) corridor, which accounted for 53% of all sales and lettings completed in the Dublin industrial & logistics sector in Q3 and 45% of all activity in the first nine months of 2018. Meanwhile, 22% of industrial take-up in the third quarter occurred along the Dublin North West (N3) corridor. A further 16% of the industrial accommodation that either let or sold in Dublin during Q3 was located along the Dublin North East (M1) corridor.
The largest majority (52%) of transactional activity in the last three-month period comprised transactions that extended to more than 9,290m² in size, while a further 26% of industrial take-up in the capital in Q3 comprised transactions that extended to between 1,858m² and 4,645m². Meanwhile, 7% of Q3 take-up comprised transactions that extended to between 929m² and 1,858m².
The overall volume of demand in the industrial and logistics sector fell quarter-on-quarter as several mandates were fulfilled during the last three-month period. In total, there was demand for 39,875m² of industrial accommodation prevailing at the end of Q3 2018. A large proportion of active requirements in the industrial & logistics sector are as a result of developments in e-commerce as service providers look to increase efficiencies in their delivery model to service the needs of online consumers - a trend that is exacerbated by Brexit concerns. In addition to demand from food companies, there is a particularly strong appetite for modern accommodation from logistics providers, couriers and parcel delivery companies at present. In addition to a small number of speculative schemes that are presently under construction in the capital, there is good momentum in ‘Build-to-Suit’ activity in the Dublin market. Appetite for data centre sites is particularly strong, which is encouraging, although sourcing good sites continues to prove challenging with very little industrial zoned land being offered for sale.
Appetite for good industrial investment opportunities remains strong, buoyed to some extent by further rental growth expectations in this sector with a further uplift in prime rents in the capital anticipated before year-end. However, supply remains constrained, particularly for larger lot sizes. Although there has been an improvement quarter-on-quarter, of the more than €2.6bn invested in Irish income-producing assets with a value of more than €1m in Ireland during the first nine months of 2018, only 2% comprised industrial investments specifically.
According to CBRE’s research, prime industrial yields in the capital sharpened by 25 basis points in recent months, standing at 5.25% at the end of Q3 2018 and likely to trend stronger over the coming quarters.