Dublin now world's second dearest industrial location

THREE NEWLY published reports track how Dublin is faring in the office, retail and industrial sectors.

One of the studies shows that industrial rents in Dublin rose by twice the European average in 2007 while another report found that the Irish capital had the lowest prime retail yield in Europe at 3.25 per cent.

Cushman & Wakefield and its Irish affiliate Lisney found that because of a 5 per cent rise in industrial rents last year, Dublin has been propelled up the league table of most expensive locations.

This is twice the average rate of rental growth across Europe and almost four times the average in western Europe, where rents grew by just 1.3 per cent.

Prime industrial rents in Dublin reached €124 per sq m (€11.50 per sq ft) per annum at the end of 2007, meaning that Dublin has overtaken Tokyo and Rishon Le Zion in Israel to become the second dearest industrial location in the world.

Dr John McCartney, head of research at Lisney, contends that rents have been driven up by tighter supply of industrial space in Dublin.

This followed from the fact that industrial development had increasingly been displaced by higher end-use value development such as residential, retail and offices in locations close to the city.

This process had been facilitated by infrastructural improvements which had made surrounding counties such as Meath, Wicklow and Kildare more attractive locations for logistic occupiers.

Knight Frank's finding that Dublin has the lowest prime retail yield in Europe will come as a surprise, particularly as the margin between it and most major cities is quite significant.

The 3.25 per cent figure attributed to Dublin compares with 4 per cent in Paris and 5 per cent in London, Madrid, Amsterdam, Stockholm, Milan and Rome.

Moscow has the highest prime retail yield at 8 per cent.

Joe Simpson, head of international research, says that the yield correction already seen in the UK has yet to be fully evidenced in the other major European centres.

The fact that London had already seen a 100 basis points outward movement in the last six months, whilst maintaining the highest rental levels, offered a strong argument for London as an investment destination.

"The underlying conditions in the majority of occupational markets remain favourable, although the pace of rental growth is likely to moderate moving forward. Demand remains healthy and vacancy rates are low by historical standards."

The agency also reported that London shopping centres are in first place for prime retail rents at €6,427 per sq m, significantly ahead of Dublin which stands at €4,500 per sq m, Edinburgh at €2,560 per sq m and Paris at €2,500 per sq m.

London's West End continues to be the most expensive location in Europe in which to rent office space with prime rents standing at €1,607 per sq m.

Moscow ranks second at €1,358 per sq m (€126 per sq ft) followed by Paris at €840 per sq m (€78 per sq ft) and Dublin at €700 per sq m (€65 per sq ft).

On the investment side, Paris and Madrid have the lowest prime office yields at 4 per cent with yields in London having moved out by 100 basis points over the last six months. Dublin and Barcelona, which stand at 4.25 per cent, are both showing keener yields than London.

Much in line with the findings in the Cushman & Wakefield report, Knight Frank found that Dublin has the lowest prime distribution yield at 5 per cent followed by London, Madrid, Copenhagen and Paris which stand at 6 per cent. And on the leasing side, London's Heathrow stands at €212 per sq m, with Dublin coming second at €140 per sq m. Madrid, Barcelona, Edinburgh, Stockholm and Moscow range from €100-€104 per sq m.