The industrial & logistics sector has experienced rapid growth across the globe in recent years. In Ireland, strong occupier demand and low supply have driven sharp increases in rents and capital values, which are now reaching record levels.
Industrial & logistics take-up reached almost 4 million sq. ft. in 2022, an increase of 33% relative to 2021. The 2022 total is above the ten-year average and marks the second-strongest year on record after 2015. Take-up was not evenly spread over the quarters, however, with almost half of the total transacting in Q3 alone. Take-up fell back to less than 600,000 sq. ft. in Q4, reflecting a narrowing of the depth of competition for new space which can be linked with a more uncertain global economic picture.
The largest deal of 2022 saw Uniphar pre-let a new 322,000 sq. ft. unit at Greenogue Logistics Park. This reflects a notable trend of increased demand for logistics space linked with the pharmaceutical sector, with UPS Healthcare also signing for 91,500 sq. ft. at Horizon Logistics Park late last year. Large retailers including Amazon, Dunnes Stores and Schuh and 3PLs including Maersk, DHL Supply Chain and DB Schenker also expanded during the year.
Prime rents in Dublin are now reaching €12 per sq. ft., up more than 10% annually. For smaller units, it is not uncommon to see rents above this level being achieved due to acute supply shortages. Vacancy is in the region of 1.5%, slightly above the 1.1% vacancy rate at the end of 2021, with most of the available space being older and smaller units. Developers have been responding by delivering new, high-quality logistics buildings but the majority of these are being pre-let, so this is not having an impact on availability to any great extent.
Close to 2 million sq. ft. of new industrial & logistics space was delivered in 2022. This includes Amazon’s 650,000 sq. ft. fulfilment centre at Mountpark Baldonnell and two other pre-let units at the park. IPUT continued to expand their logistics portfolio with several units across Quantum Distribution Park and Aerodrome Logistics Park reaching completion in 2022. IPUT also submitted a planning application for 795,000 sq. ft. at Nexus Distribution Park which has now been approved. Other developers such as Henderson Park, Rohan Holdings, Palm Logistics, Jordanstown Properties and Park Developments are actively delivering new space across Dublin with most offering Design & Build opportunities too.
Industrial & logistics remained the best performing property sector in 2022, although it is now facing some challenges. Inflation has negatively impacted retailers and 3PLs, with supply chain issues, rising fuel costs and wages hitting profit margins. The effect of rising prices on the consumer market remains to be seen but if retail spending falls, so too will demand for warehousing space. On the other hand, a diversification of occupier profiles into niche areas such as cold storage for pharmaceuticals is positive and sustainable given Ireland’s world-renowned pharmaceutical industry. Even if the number of active occupiers declines in the short-term, low availability and rising construction costs mean that demand will continue to outstrip supply and drive sustained rental levels in 2023.