Industrial commercial property space take-up surges
Take up in the industrial market surged by 48pc last year, as the sector posted its busiest period on record.
New research from property broker Savills shows that 475,000 sq m of space was taken during 2015 – more than three times the level seen at the bottom of the market in 2011.
The industrial sector has been among the slowest areas of the commercial property market to recover since the crash but Savills’ report makes clear that improvement is now happening.
The broker claims that there is now a shortage of high quality warehouses and logistics property for the first time in 10 years.
That shortage is helping to drive up rents and capital values as yields compress sharply.
Savills Ireland director of research John McCartney said the improvement in the wider economy is now feeding through to the logistics sector.
“Higher levels of goods traffic have had knock-on effects throughout the logistics supply chain. We see this in commercial vehicle registrations and Dublin Port volumes but it has also driven the demand for warehousing space to an all-time high.”
The report also notes that, despite a steady decline in sales relative to lettings through the whole year, sales still accounted for just over two thirds of take-up.
Savills head of industrial Gavin Butler claimed that even at higher prices, industrial real estate still offers good value compared to other markets such as the office sector.
“Industrial buildings offer exceptional value for money compared with other property sectors and can still be acquired at below replacement cost.
However, looking ahead, Mr Butler expects this trend to change;
“With the availability of good quality units becoming limited and values rising, we expect prime rents and capital values to increase by between 20pc to 30pc in 2016.
In turn, this will make new development viable again and in fact we are now seeing Dublin’s first speculative development project under way near the airport. More of this will follow throughout the greater Dublin area towards the end of 2016 and into 2017,” he added.