Sharp decline in take-up of industrial space

New research from JLL shows a sharp decline in the take-up of Dublin industrial space in the first quarter of 2016 but, due to limited availability of stock in key areas, rents in the sector have continued to rise.

Industrial take-up was 51,118sq m (550,233sq ft) in Q1, 2016, according to JLL.

This was 48 per cent down on the last quarter of 2015 and 55 per cent lower than the first quarter of 2015.

There were only two transactions in the sector greater than 4,645sq m (50,000sq ft) compared to six in the previous quarter and this may have skewed the figures somewhat.

The largest deal was a 9,290sq m (100,000sq ft) letting of the Uniphar Facility in Citywest Business Campus. Some 80 per cent of deals were for space less than 1,858sq m (20,000sq ft) while the average deal size was 1,278sq m (13,756sq ft) compared to 1,938sq m (20,865sq ft) in Q4 2015.

Hannah Dwyer, associate director and head of research at JLL, said 2016 has started "steadily" for the industrial sector. "Take-up for Q1 was lower than the previous quarter, but this is not surprising as Q4 2015 was one of the strongest quarters ever recorded. Plus, we saw fewer larger deals, which has impacted total volumes. Occupiers continue to be focused on prime quality space in key south-west and north-west locations but the limited availability of space is impacting choice, and therefore the demand is not fairly reflected in take-up trends."

Prime industrial rents

JLL says prime industrial rents have experienced further growth in Q1 and now stand at €80.73 per sq m (€7.50 per sq ft). Secondary rents, however, remain unchanged quarter-on-quarter at €53.82 per sq m (€5 per sq ft). Typical lease lengths, too, remain unchanged at 10 years with a break option after year five but longer leases are being achieved where there is competition for prime space. “Rent-free periods on the above terms remain unchanged,” according to JLL, “but they are under pressure.”

Nigel Healy, director industrial at JLL, says the greatest threat to the industrial market in 2016 is likely to be lack of prime stock.

“This impacts occupier decisions, with limited choice, and in some instances, no choice, for prime space in key locations, he says. “ This has also impacted rental growth, and we are expecting rents to increase further over the year. Prime rents may achieve € 8.75 per sq ft by the end of 2016, which would be a 25 per cent increase in the last 12 months. Increases in rents will hopefully trigger some much-needed supply pipeline, and hopefully, we will see more developers submitting planning submissions for industrial development in the short-term.”