A lack of supply in the industrial and logistics market saw the vacancy rate in Dublin hit a 20-year low in the third quarter, as Covid-19 and Brexit continues to drive structural demand changes.
Latest figures by Cushman & Wakefield show that the vacancy rate fell to just 6 per cent in the third quarter, the lowest rate in over 20 years. This is a result of a number of factors, including issues on the supply side, where limited development activity for the past decade and exceptionally low levels of market churn in the past year have both played a role.
“The market has also recorded a loss of some stock for redevelopment purposes, a feature evident across other markets in Europe also,” the report says.
Overall, a total of 228,200sq m of space was transacted in the sector in the year to date. This includes space taken up and also pre-let activity of units in the development pipeline. This is up substantially on 2020, when 176,650sq m was transacted during the same period.
Lack of supply
Brendan Smyth, head of development land and logistics with Cushman & Wakefield Ireland, said the lack of supply became very evident during the third quarter, with a number of grade C buildings being taken up.
“This is being driven by a relatively modest level of new product coming to the market and the majority of which is pre-let before the unit completes construction,” he said.
According to the report, demand in the market is evident across buildings in all locations and of all grades, with a number of large-scale requirements in the market.
Large transactions in the year to date include the pre-let of 60,650sq m at MountPark, Baldonnell, Dublin 22, to Amazon. Elsewhere, 20,450sq m was occupied by reportedly An Post, at the former Lufthansa building on the Naas Road, Dublin 12.
Looking ahead, Cushman & Wakefield expects to see more pre-let activity as availability levels within the market have grown increasingly tight. Just 258,625sq m was available as of the end of September, an annual decrease of over 20 per cent. Of this, just 20 per cent is grade A, while there are only four grade A units greater than 5,000sq m available. To further emphasise the lack of available space, the authors of the report note that the current figure sits below the long-run annual average for take-up of 346,000sq m.
Under construction
However, an uptick in new space coming to the market is also expected, with a total of 210,450sq m of space under construction at the end of the third quarter of 2021, which is due to be delivered over the next 15 months. According to the report, of this some 96,650sq m is already pre-let, however it is expected that further pre-lets are expected to occur as these units progress towards completion.
In addition, the increased occupier demand for industrial and logistics space is mirrored, if not surpassed by investment activity. Occupiers are facing intense competition from investors across all vacant units, leading to in most cases, occupiers being outbid by investors.
On the investment front, Kate English, chief economist with Cushman & Wakefield, said that, overall, investment in industrial and logistics created total capital inflow of just over €445 million in the year to date.
“This total includes income-generating assets and a forward fund transaction from the second quarter, a deal type of which more are expected in the asset class. The volume surpasses all annual records for the asset class since their detailed series began,” she said.
