Take-up of industrial space dives in slow Q1
Take-up in the industrial and logistics sector slumped in the first quarter of this year, after posting a near record level of interest in the last three months of 2015.
New research from JLL shows that between January and March 2016, firms took up an estimated 550,233 sq ft of space.
That was 48pc lower than take-up in Q4 2015 and 55pc lower than Q1 2015.
There were only two transactions greater than 50,000 sq ft compared to six last quarter, which has had a big impact on the overall totals. The vast majority - around 80pc - of deals were for space less than 20,000 sq ft and the average deal size was 13,756 sq ft compared to 20,865 sq ft in the final quarter of 2015.
JLL head of research Hannah Dwyer, said that 2016 has started "steadily" for the industrial sector.
"Take-up for Q1 was lower than the previous quarter, but this is not surprising as Q4 2015 was one of the strongest quarters ever recorded.
"Plus, we saw fewer larger deals occurring, which has impacted total volumes. Occupiers continue to be focused on prime quality space in key southwest and northwest locations but the limited availability of space is impacting choice, and therefore the active demand is not fairly reflected in take-up trends," she added.
Prime rents have experienced further growth in Q1 and now stand at €7.50 per sq ft.
JLL director for industrial Nigel Healy, commented: "2016 is set to be another strong year for the industrial sector but the greatest threat to the market is the lack of availability of prime stock.
"This impacts occupier decisions, with limited choice, and in some instances, no choice, for prime space in key locations. This has also impacted rental growth, and we are expecting rents to increase further over the year. Prime rents may achieve €8.75 per sq ft by the end of 2016, which would be a 25pc increase in the last 12 months.
"Increases in rents will hopefully trigger some much-needed supply pipeline, and hopefully, we will see more developers submitting planning submissions for industrial development in the short-term," he added.
While the industrial and logistics sector has seen steady improvement so far in the last year, rents are still some way off reaching a point where new construction would be seen as viable.
CBRE this week said it expected to see "continued upward pressure on rental values in [the industrial] sector over the course of the coming months as the pressure to secure modern accommodation intensifies."
"This upward pressure will be most acute for prime accommodation although secondary rents are expected to rise further also," CBRE added.