Industrial & logistics continues to be the star performer with immensely strong occupier and investor demand continuing in Q1 2022.
The strength of the occupier market, along with rising build costs and extremely low availability have been driving sharp rental growth in this sector across the country. Large retailers and third-party logistics companies (3PLs) have been particularly active, driven by e-commerce growth, particularly in the context of Brexit-related supply chain issues. This has prompted many retailers who previously would have fulfilled Irish orders from the UK and mainland Europe to look for warehousing and logistics space in Ireland to mitigate against increased delivery costs and delays.
Take-up in the industrial & logistics sector in Dublin reached just under 940,000 sq. ft. during the first three months of the year – almost double the level of take-up recorded during Q1 2021. This is low compared with the depth of demand as take-up continues to be limited by a lack of suitable stock across all size brackets and locations.
Prime rents in Dublin are now reaching €11 per sq. ft., an increase of 4.8% annually. Average industrial rents, according to the MSCI / SCSI property index, have seen stronger growth of 7.4% in the year to Q1. Rising construction costs along with low supply should see prime rents continue to rise, potentially reaching €12 per sq. ft. later this year.
Tight supply of best-in-class units has meant that rents for modern units in regional locations are almost on par with those being achieved in Dublin. Rents in Cork are now in the region of €9.50-€10 per sq. ft. and expected to rise further. We have also seen rents of more than €11 per sq. ft. being achieved in Limerick / Shannon in certain cases. This is very different to the situation being experienced in the office market where prime rents in Dublin are more than double those in regional cities.
With supply nowhere near demand levels and vacancy in the region of 1%, development in this sector is extremely active and there have been several new entrants to the market in recent months. IPUT recently acquired 118 acres of land at Killamonan in North Dublin for logistics development and plan to double their logistics portfolio to approximately 5.5 million sq. ft. in the coming years. Following their acquisition of the Core Portfolio last year, Palm Capital recently announced plans to invest €100 million in Naas Enterprise Park over the next five years.
Newpark and Bain Capital are continuing development at Vantage Business Park in North Dublin, while UK logistics developer Chancerygate and partner Bridges Fund Management entered the Irish market with the acquisition of a 5-acre site on the Swords Road in Santry. Notably, Chancerygate / Bridges are planning to deliver smaller logistics units on this land which will be welcomed as most planned developments to date have been focused on delivering larger (50,000 sq. ft. plus) units.
Amazon’s 650,000 sq. ft. fulfilment centre at Mountpark Baldonnell reached completion in Q1, as did Unit C at Mountpark Baldonnell (88,372 sq. ft.) which had been pre-let to Homestore+More last year. In Q1 2022, DB Schenker pre-let Unit D at Mountpark Baldonnell (134,000 sq. ft.) which is due for completion in Q2. This followed the acquisition by DB Schenker of 14.2 acres at Liffey Business Campus in Kildare last year which will be home to a new 219,000 sq. ft. unit.
Limited supply of larger units in particular has meant that new or expanding occupiers with large requirements now invariably need to either pre-let planned buildings or consider the Design & Build (sometimes referred to as Build-to-Suit) route.