Take-up of industrial and logistics space in space in Dublin totalled 2.3m ft² in 2021, representing a decline of 31% compared to 2020 – and 20% below the five-year average – according to a new report from property advisor, Savills Ireland. Driving this decline was a fall in the number of deals done, with the 79 transactions completed, the lowest level on record. This decline forms a part of a wider trend, with the average number of deals completed over the last three years being 85, compared to an average of 112 over the previous five.
Gavin Butler, Director of Industrial and Logistics, commented: “Take-up has become increasingly dependent on new builds. Leases of new stock accounted for 48% of annual take-up, despite accounting for just 1% of total stock. A further 22% of take-up was in units built in the 2000s, with pre-2000’s stock making up the remaining 30%. With no availability in stock built in the 2010s occupiers face the choice of either looking further up the pipeline for modern stock or settling for older lower quality stock, with no middle ground.”
Gavin continued: “The share of take-up accounted for by sales – as opposed to lettings – fell to 14% in 2021, which represented its lowest level on record and down from 66% in 2014. 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 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 both occupiers and investors.”
Gavin concluded: “The strength of the market is driving development and 2022 will see a quantum amount of new delivery come on stream with 2.2m sq ft due to be completed. This represents a more than doubling of last year's new supply, which was a record year in itself. It is worth noting that because all of this projected delivery for 2022 is already on-site, we do not forecast any slippage into 2023. While the headline delivery number is high, two-thirds of it is already committed, meaning further commencements are required to meet prevailing occupier demand.”
The largest deal of the year was the lease of 200,000ft² in the former Lufthansa building in Baldonnell Business Park in Q3. Logistics firm Kuehne and Nagel’s pre-let of 165,000ft² in Unit 2, Horizon Logistics Park, in Q2 was the second-largest deal of the year. The fourth-largest deal of the year for Unit A02 in The Hub Logistics Park also transacted in Q2, with the unit only finishing construction in Q4. Q4 saw the third and fifth largest deals of the year: Unit G in Aerodrome Business Park and Unit 2 in Quantum Distribution Park. Harvey Norman’s pre-let of Unit 2, Quantum Distribution Park, which will not finish construction until Q3 2023, demonstrates the forward-looking stance occupiers have adopted to obtain suitable stock.
