Industrial take-up to drop by 33% in 2009

TAKE-UP OF industrial space in the greater Dublin area this year is expected to reach 100,000sq m (1.076 million sq ft) – a drop of 33 per cent on the volume leased in 2008, according to a study by estate agent Savills.

The report estimates that only 84,000sq m (904,168sq ft) of space was leased or sold up to the end of September because of the economic slowdown and readjustments in the property market.

Not surprisingly the volume of empty space has increased significantly and currently stands at 985,000sq m (10.6 million sq ft). This figure is 42 per cent higher than in 2008 when about 692,000sq m (7.448 million sq ft) was available.

Researcher Joan Henry says that with industrial market activity expected to remain subdued for the remainder of the year, she anticipates that the unoccupied space will peak at 1 million sq m (10.763 million sq ft) by year end.

Gavin Butler of Savills noted that the higher vacancy rate is being driven mainly by freed-up space that has come on the market since last January.

A great many tenants were exercising break options, he said, and were not renewing leases when they expired.

Instead, they were consolidating their operations into existing premises to reduce costs. Apart from these retrenchments, there were also fewer new lettings negotiated this year.

Much of the empty space has come on the market in Dublin south-east and the south-west.

Butler said that in the south-east, in particular, some premises had been earmarked for redevelopment but owners would not proceed with these plans in the current climate and, alternatively, were attempting to generate cash flows in the short term.

With bank finance tight all year long, Savills estimates that over 90 per cent of the transactions in 2009 have been in lettings rather than sales. “Leasing activity is expected to remain the dominant source of transactions for the remainder of 2009 and the first half of 2010,” says Henry.

The report predicts that take-up next year will be broadly similar to the 100,000sq m (1.076 million sq ft) likely to be let this year and that there is unlikely to be any significant increase is lettings until 2011.

Butler says that competition among landlords will continue to intensify as a larger volume of stock becomes available. “This has, and will continue to, put pressure on rents and force landlords to deliver more flexible terms than in the past.”