Industrial MarketStrong demand for industrial property, particularly in the latter half of 2006, helped to accelerate prices.

Prime land in southwest Dublin is now achieving €1.5 million or more an acre and more than €850,000 an acre in areas north-west of Dublin.

Property commentators were generally upbeat about the performance of industrial land during 2006. Demand continued to outstrip supply in key locations close to the airport along the M1/N2 corridors and in south-west Dublin along the N7 and N81 corridors, says Garrett McClean, director and industrial land specialist at CB Richard Ellis.

Total uptake for the year is widely expected to reach 400,000sq m (4.3 million sq ft) with about 250,000sq m (2.69 million sq ft) of this in the greater Dublin region.

"This strong demand has resulted in increased land values for prime serviced land within close proximity to the M50," says McClean.

This has helped to mop-up some of the overhang of industrial space, suggests Hamilton Osborne King's Gavin Butler. "Vacancy rates are expected to drop to 11 per cent by the end of 2006, with over 70 per cent of the total take-up for the year taking place in north-west and south-west Dublin."

Even as property values soared, rents remained stubbornly static, says CBRE's Marie Hunt. She notes values reaching €1.6 million along the N11 corridor in south-east Dublin/north Wicklow. Yet a 7.5-acre site at Pinnock Hill in Swords is being guided at €13 million.

Rents were slow to advance, however, remaining close to €118 per sq m (€11 per sq ft) for prime properties and €86 per sq m (€8 per sq ft) for secondary accommodation.

Market forces are also having a powerful impact on the industrial sector, says Lisney industrial director, Cathal Daughton. There is a strong move away from renting to purchasing, a shift driven by low interest rates.

"Rents probably wouldn't have increased dramatically but, with the rises towards the end of the year, we may see more renting," says Daughton.

Jones Lang LaSalle's industrial director, Bill Tuite, describes a similar picture. "It has been a very satisfactory year when looking at sales. The letters are still the poor relations," he believes.

Up to 85 per cent of industrial activity has gone to sales, with low interest rates and "the Irish love of property ownership" fuelling this, he adds. "The bulk of the activity is at the smaller end of the market."

Many purchasers view this as an opportunity to put aside a form of pension. "A lot of the foreign companies have a tendency to lease but nearly all of the leasing here is in the office market," says Tuite.

The industrial market has also proved of interest because of changing uses from industrial to retail park and apartment developments, and also the slow, but steady, release of some of the Industrial Development Authority's extensive industrial land bank.

The alternative land use factor has seen land values hit €40 million to €55 million per hectare, according to Lisney.

"Sandyford would be the main example of changed use, but also the city centre. For example, on Cork Street and along the river in Dublin," says Tuite.

This is having a tremendous impact on land values in some of the old industrial developments but is also influencing where industrial activity is strongest, says Daughton. Ready access to the Luas in Sandyford has been a major factor and has opened up significant "redevelopment opportunities", Daughton says.

He mentions the Atlantic Homecare site in Sandyford on two acres which sold for €37 million. Another is in the IDA-owned Clonshaugh Industrial Estate where the AF1 site on 14 acres and comprising 10,219sq m (110,000sq ft) in buildings sold for €22 million.

"The price of that would reflect the development value of the property," says Daughton. "A lot of the old industrial stock is getting eaten up by higher value uses."

Cookstown has seen property values rocket from €1 million or €2 million per acre to €7 million per acre as retail developments take hold, says Daughton.

The conversion of industrial sites to alternative uses is affecting where industrial users locate. The loss of industrial space in Dublin's south suburbs has led companies to relocate to the north and north-west. For example, the North City Business Park and the Dublin Airport Logistics Park. Easons bought a 15,329sq m (165,000sq ft) unit and DHL a 15,794sq m (170,000sq ft) unit on the north side.

Industrial property commentators continue to watch the by now "old reliables" that influence activity, including the Dublin Port Tunnel, set to open in December, and industrial zoning along the M2 and M3 routes.

The tunnel has been spurring industrial activity in Clonshaugh and even in Baldoyle. The motorway routes have opened up significant lands particularly suited to industrial and warehousing uses and the relevant councils have exploited the opportunity with the appropriate zonings.