DEVELOPERS OF industrial units are set for a tough few years due to a dramatic oversupply of buildings and intense competition which is forcing down rents and putting pressure on landlords to offer more flexible letting terms. Take-up of space is expected to fall by 50 per cent this year.

The latest “industrial market watch” from Savills has found that there was 57 per cent more space available to buy or let in the Dublin area at the beginning of this year (a total of 692,000sq m/7.45 million sq ft) compared to January 2008.

This reflects an increase in both the amount of new space becoming available as well as an increase in the volume of old space which has been put back on the market due to the change in economic, financing and demand conditions.

Joan Henry, head of research at Savills Ireland, says that the increase in the amount of space available highlighted the fact that supply was significantly outstripping demand and this was expected to remain the case for the rest of 2009.

Gavin Butler, director of Savills industrial division, says there has been a significant shift towards letting rather than sales, particularly in the second half of 2008 and in the first three months of this year. He estimates that about 90 per cent of activity was now leasing rather than sales and he expects this trend to continue for the remainder of 2009 and into 2010.

Butler suggests that competition among landlords would intensify this year as a large volume of stock becomes available. That would put downward pressure on rents and landlords would have to deliver more flexible terms than in the past.

The Savills report shows that 2008 was a year of two halves, with the first six months showing a surge in activity and a growth of 35 per cent in lettings and sales. However, the appetite for space dampened in the second half in line with the deterioration in economic conditions. Take-up in 2008, while strong, was 35 per cent less than in 2007.