Industrial accommodation demand on the rise with eaves heights
THE transformation of the Irish labour market from a blue to a white collar workforce is having a direct impact on both the extent and type of industrial property being sought in the Dublin market, according to a report published by DTZ Sherry FitzGerald.
The demand for industrial accommodation rose to new heights in 1998, with in excess of 5.1 million sq ft of space being taken up in the Dublin market during the year, the report said. This figure is double the 2.5 million sq ft taken up in both 1996 and 1997.
The transformation from low to high-technology usage is also affecting the nature of demand. Two or three years ago, a standard new industrial premises had an eaves height of between 18 and 20 ft, the report found. Almost half of all the accommodation taken up during 1998 was in excess of 20 feet in height.
"The combination of the increase in the value of land zoned for industrial purposes and the corresponding increase in the price of new warehousing accommodation has encouraged occupiers to maximise the cubic capacity of their premises by increasing eaves height," the report said.
"As a result the average internal height of new industrial buildings is now 24 ft. Developers are responding to the demand by constructing buildings of over 20,000 sq ft, with clear internal heights of 30 to 40 ft This is in keeping with developments in the UK, where buildings of a similar design have been constructed since the early 1990s."
The transformation of the industrial market increased during 1998 as existing industrial buildings in areas such as Sandyford, Stillorgan and Broomhill Road were redeveloped as high technology business/office units. "The fact that land values in some of these areas have increased beyond the value of the existing premises serves to confirm this trend."
However, the report found that the strength of demand for industrial accommodation during 1998 was not reflected in rental levels. One reason was that a preference to purchase rather than lease industrial accommodation increased as the cost of borrowing fell with reductions in interest rates.
Rents for prime modern industrial property of up to 5,000 sq ft ranged from £6 to £8 per sq ft, depending on location and office content. One year ago, rental levels for similar properties ranged from £5.50 to £6.50 per sq ft.
Rents of £5.85 to £7 per sq ft were achievable on prime industrial buildings of more than 20,000 sq ft, the report said.
"Contrary to what one would expect, the supply of industrial accommodation available in the Dublin market actually increased in 1998. This was due to the large number of both new and second-hand properties that came to the market during the year."
At the end of last year there was approximately 2.2 million sq ft of industrial accommodation available, having risen from 1.6 million sq ft at the end of September. The vacancy rate stood at 8.4 per cent at year end.
The report suggested that this figure may be artificially high as a large proportion of the space available in the market was older accommodation and not suitable for many firms entering the market. Only a third of the total industrial accommodation in Dublin was developed in the 1990s.
The report predicted that the combination of accelerating growth in the high technology sector and the success of business parks such as City West and Park West would result in an increase in the number of business parks under construction in Dublin in the next century. The increased confidence in the market among developers was likely to generate a greater role for speculative development. "This trend must be monitored carefully given the relatively short lead-in time required to deliver industrial buildings," it said.