Tuesday 21 October 2014

Industrial and logistics property splurge shows revival

Published 10/07/2014 | 02:30

The Greenogue Portfolio of industrial buildings was among the sellers at the latest Allsop Space auction, where more than €14m was spent on industrial property

DEMAND and prices for industrial properties have picked up based on recent sales and letting activity.

As many as 25 warehouse and logistics properties with a combined value of €14.08m were sold recently by Allsop Space. This brings to 64 the number which the auctioneers sold so far this year across the whole country.

These 64 achieved a combined value of €24m which is more than three times the €7.69m which the agents achieved from 42 industrial properties in all of 2013.

Meanwhile CBRE reports that several large industrial transactions recently went sale agreed including the 9,457 sq m former Curragh Carpets facility on five acres in Newbridge, Co. Kildare and will significantly boost take-up volumes when completed in the second half of 2014.

"There is particularly strong demand for properties along the N11 corridor with industrial facilities in Sandyford and Stillorgan attracting a high level of enquires," says CBRE's Garrett McClean.

He says that demand in the industrial sector is primarily emanating from corporate occupiers who are focussed on larger units with smaller indigenous occupiers mainly opting to lease as opposed to purchase premises.

The average Dublin price per square foot achieved by Allsop has risen from €26 per sq ft in 2013 to €35.

That price is based on an average of average prices (stet) for 35 lots in three auctions this year. These lots had combined floor areas of 623,000 sq ft, and generated a total of €17.343m. The strengthening prices are also reflected in how the average Dublin gross yield has contracted from 13.52pc last year to 11.92pc for this year.

Associate director Richard O'Neill estimates that the net yield for prime Dublin properties, after deducting 4.46pc transaction costs, contracted from 8.68pc to 6.7pc. That suggests a 22.8pc increase in prime Dublin values.

Allsop's most valuable deal was a portfolio of 26 warehouse units at Greenogue Business Park, Rathcoole, Co. Dublin, which sold for €6.7m prior to last week's auction. The units have a total floor area of 206,000 sq ft and 16 units were generating combined rents of €625,000 a year. Some time previously that property had gone sale agreed for €5m but the deal collapsed and so it was put in the July auction catalogue.

The auction sold a semi-detached unit, 23 Cookstown Industrial Estate, Tallaght, for €680,000. Comprising office and warehouse of 3,655 sq. m it is let to Air Movement Supplies Limited at a current rent of €80,000 per annum, suggesting a gross yield of 13.2pc.

In Baldoyle, Dublin 13, the modern Unit 68 Grange Close, Baldoyle Industrial Estate, sold for €480,000. Extending to 1,285 sq. m, it is generating €30,000 from a lease that's due to expire at the end of this year.

But demand and strong prices are not confined to Dublin. Two industrial investment properties in Mallow, Co. Cork, sold in one lot for €1.55m, suggesting a relatively keen gross yield of 8.58pc. Let to two well-known brand names, Advance Pitstop and An Post, they are generating a combined rent roll of €133,000.

A modern end of terrace unit extending to 1,310 sq m (14,100 sq ft) in Kells, Co. Meath sold for €460,000. It is let to Mafic Black Basalt (Ireland) Ltd. On the basis of its rent reserved of €45,000 a year it appears to have a gross yield of almost 9.8pc.

Outside of Dublin, prices per sq ft averaged €29 per sq ft with the latter figure based on 29 lots with combined floor areas of 503,500 sq ft selling for a total of €6.6m.

Gross average yields in the rest of the country contracted from 16pc in 2013 to 12.7pc over the year to date.

However Richard O'Neill says that these provincial averages were boosted by two big provincial deals this year: the Mallow deal referred to above and a Kells National Car Testing Centre deal in May. If those two were excluded, then provincial prices would average around €23 per sq ft.

Meanwhile Savills reports that take-up of Dublin industrial space, including lettings, increased in quarter two to 62,000 sq m and cumulative take-up in the last 12 months amounted to 254,000 sq m. "Consequently, vacant space is down 21pc in the last 12 months," adds research director John McCartney.

He says that sales continue to outstrip lettings reflecting value available in the market.

"Cash buyers are dominating, partly driven by the CGT waiver while rents and capital values are edging up for prime lots of over 1,000 sq m," he adds.

CBRE director Marie Hunt says prime Dublin rents increased slightly during Q2 to €62 per sq m - the first increase in this sector for six years. "We are also now beginning to see some tightening in inducements with the standard six month rent free period on most five year leases now shrinking to between three and six month," she adds.

She estimates that secondary Dublin rents average €37 per sq m and prime provincial rents €33 per sq m.

Properties currently for sale include the former Fruitfield facility on 11.17 acres in Tallaght, Dublin 24, for which William Harvey and CBRE are guiding €4.25m.

Investment opportunities include an office and industrial investment at Blanchardstown Business & Technology Park, Dublin 15 for which Lisney are guiding €7.5m.

The industrial market has been perhaps the worst hit of the main property sectors since the crash. Rents have at least stopped falling but most experts see little scope for meaningful growth in rents in the near term at least.

However there has been some signs of movement in recent weeks.

The glut of properties available around the M50 in Dublin have begun to change hands.

HIbernia REIT surprised some in the market in April when it agreed terms to buy the former Gateway site at Newlands Cross in west Dublin for €10m. That is a more than 93pc discount on the price it sold for in May 2006, when it was purchased for €107m by Dublin brothers Gregory and Anthony Alkens.

The Alkens had planned to develop a huge number of apartments and offices on the site and capitalise on its close proximity to the LUAS line into the city centre but planning permission never materialised.

Under the South Dublin County Council development plan, the site may be used for purposes including industrial, retail warehousing, car showrooms, transport depot and petrol stations.

The property comprises an industrial or logistics facility with what Hibernia called "potential for significant intensification".

There is 178,000 square feet of warehouse accommodation on the site, which is currently 46pc occupied and is producing an annual rental income of €517,000.

The gross yield is 5.12pc.

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