Ireland Industrial Market Continues to Perform Steadily in 2017

Ireland Industrial Market Continues to Perform Steadily in 2017

Commercial News » Dublin Edition | By Michael Gerrity | October 31, 2017 8:00 AM ET

According to JLL, industrial lease deals in Ireland during Q3, 2017 totaled 407,904 sq. ft across 33 deals. This is a decrease of 42% in the quarter, and a 55% decrease compared to Q3 2016. The main cause for the reduction in take-up is the decrease in the number deals, with 11 fewer deals in Q3 (33) compared to Q2 (44). There was also a decrease in the number of larger-sized deals, with only 1 transaction greater than 50,000 sq. ft compared to 4 last quarter. The greatest level of activity continues to be focused on smaller-sized space with 67% of deals for space less than 10,000 sq. ft.

Combined with take-up for H1, year-to-date take-up is 1.6 million sq. ft. This is 16% lower than the same period last year.

Hannah Dwyer, Divisional Director and Head of Research says, "The industrial market is performing steadily, with no real change in sentiment in the last 3 months. As we enter the final quarter of the year, the outlook for industrial remains balanced. Whilst there has been a steady level of take-up in the year-to-date, the reality on the ground is that depth in the market is swallowing somewhat, with factors such as globalization, Brexit concerns and a lack of indigenous take-up casting some caution on the sector. In addition, the lack of supply in the market is impacting occupier decisions, with limited suitable existing stock available. We are currently dealing with a number of active inquiries from large occupiers, and there is limited choice in terms of product that we can offer to them.

That said, Q4 is typically the strongest quarter for industrial take-up and therefore we are expecting take-up to remain steady in the next 3 months. Take-up could potentially achieve between 2 - 2.5 million sq. ft by the year-end. This is what we were expecting at the start of the year and is only marginally down from the 2.6 million sq. ft that was occupied last year."

Hannah added, "The greatest issue for the sector continues to be supply, with limited existing quality stock available across all locations. Construction activity remains limited with only 2 major schemes under construction in Dublin. The increase in construction costs continue to make development economics difficult, and therefore there is no short-term solution to resolve the supply issue. With rents increasing, it may trigger developers to undertake some additional development activity. In terms of opportunities in the market, there are a number of 35 year leases that were signed in the 1980's that are due to expire in the short-term. Whilst this may bring some additional supply to the market, many of these will require redevelopment prior to occupation and therefore will not be available in the short term.

Rents are likely to continue to rise, fueled by a lack of quality supply and therefore choice for occupiers, teamed with continued steady demand. Rents could edge up to €9.00 per sq. ft. in the next 3 - 6 months, with potential for future growth as we enter into 2018."

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