Industrial space take-up rises 60%

TAKE UP of industrial space in the greater Dublin area this year will be 60 per cent higher than in 2009, according to the latest research from real estate advisers Savills. They say a total of 142,000sq m (1,528,474sq ft) of space has been newly let or sold so far this year and the figure by the end December will be about 175,000sq m (1,883,683sq ft).

A second report on the industrial market, by Lisney, is much less optimistic and suggests the total take up for the year will be only 135,000sq m (1,453,127sq ft).

Gavin Butler of Savills says that of the 36 deals in the third quarter only two were sales, reflecting the continuing difficulty occupiers are facing in arranging finance and their reluctance to use cash reserves to acquire buildings. The largest deal in the last three months involved the letting of a 7,271sq m (78,264sq ft) high bay warehouse at Stadium Business Park in Ballycoolin, Dublin 15, to AGI Media, on a four years nine months lease, at a rent of €391,000 per annum.

Savills estimate the vacancy rate at the end of the third quarter at 1.3sq m, up from 1.279sq m at the end of the second quarter. This was the lowest quarter-on- quarter increase for a considerable time and was an indication that the industrial sector was beginning to stabilise following a trebling of the vacancy rate between 2008 and 2010. Although the starter unit sector remained over supplied, there was only a limited volume of good quality space in buildings over 5,000sq m (53,820sq ft).

Cathal Daughton of Lisney said the demand for industrial property remained sluggish. Potential tenants were naturally indecisive regarding their property decisions given the uncertainty about business prospects in the short to medium term. This was reflected in the flexibility they required in taking any lease. Occupiers could obtain very attractive rental deals with significant incentives such as fit-out contributions and/or rent- free periods.

Butler says rental levels have shown signs of levelling off in recent months with prime rents now ranging from €55 to €75 per sq m (€5 to €7 per sq ft). He agreed that landlords recognised the importance of flexibility on lease and rental terms.

Daughton notes that there has been an increase in the number of industrial properties going for sale at realistic prices. He says, however, that this end of the market continues to be slow and until such time as finance is more readily available there will continue to be a large gap between what purchasers could finance and what vendors expected.