Tuesday 24 October 2017

Recovery in industrial sector beats expectations

This property at Courtstown Industrial Estate in Little Island Cork was sold for €4.5m.
This property at Courtstown Industrial Estate in Little Island Cork was sold for €4.5m.

Donal Buckley

The recovery in demand for industrial accommodation has continued into the second quarter of the year.

Estimates for Q2 industrial sales and lettings range between 80,000 sq m according to Lisney and 98,150 sq m, according to CBRE who say this brought total take-up in the Irish capital in the first six months of 2015 to 184,428 sq m or almost 2 million sq ft, which is a very strong volume of activity for a six month period.

An even higher 200,000 sq m for the six months, is estimated by JLL's Woody O'Neill.

According to CBRE, a total of 87 individual industrial transactions signed in Dublin during the first six months of the year. This is more than double the volume of activity recorded in this sector in Dublin in the first half of 2014. The sector accounted for about €17m of those investment deals valued at more than €1m.

CBRE's John Reynolds, says that prime Dublin industrial rents remain stable at €70 per sq m and like a number of agents he expects them to rise further in the autumn.

Philip Harvey of William Harvey reports already having done a deal at €75 per sq m and sees rents reaching €80 per sq m as the lack of grade A accommodation is generating upward pressure on both rents and prices.

"Rents will need to reach €100 per sq m to justify new development although they could reach that for bespoke buildings within 12 months, but it is likely to only be for bespoke buildings" he adds.

Cathal Daughton, director of Lisney concurs saying there will be design and build opportunities this year "particularly for larger specialised premises. However he does not expect speculative projects unless "a pre-let or pre-sale has been done on an adjoining site."

One of the first new developments may occur at Horizon Logistics Park in North Dublin where JLL reports a significant increase in enquiry levels and where Green Reit has planning permission for the next phase of logistics development.

But some owner occupiers are also pressing ahead. Facebook plans to build a new 18,587 sq m data centre north of Blanchardstown.

The biggest deals of the quarter were seen in Munster. Limerick City and County Council bought the former 32,516 sq m Dell factory on 25 acres at Plassey for around €5m for use as a film production hub.

In Cork DTZ Sherry FitzGerald acquired three units extending to a combined 84,530 sq ft at Courtstown Little Island, on behalf of DB Schenker for around €4.5m. The joint sales agents were Lisney and Downing Commercial.

The largest Dublin deal is believed to be Unit 2 at Baldonnell Business Park, Dublin 24 which extends to 5,560 sq m. Gavin Butler of Savills had been asking €2.95m or a rent of €375,000 a year for the headquarters style facility. The purchaser is believed to have paid close to the asking price.

Brendan Smyth of DTZ Sherry FitzGerald reports the sale of Beech House, a 2.13 acre property at Greenhills Road with a 4,986 sq m headquarters style building which the purchaser is expected to convert to a motor showroom. DTZ was also involved on the sale of the Belgard Motor Complex south west of Tallaght for around €1.5m.

Meanwhile the former Tayto facility at Malahide Road, extending to 4,830 sq m, on 3.3 acres was sold by David Carson, receiver to Danninger, a former Liam Carroll company. The price has not been disclosed but the agent William Harvey had been asking €1.95m.

In Damastown Way, Mulhuddart Dublin 15, two semi-detached high bay units, 1A and 1B, with a combined 3,781 sq m on two acres were sold through Harveys who had asked €1.2m.

In floor area terms the largest Dublin property to sell in Q2 was the Bluebell Business Centre on the Old Naas Road, Dublin 12, a 2.5 acre property which was producing rental income of €234,484 from a number of existing short term tenancies from its 64,058 sq ft of office, industrial and workshop accommodation. Lisney had been asking €900,000 for it.

Meanwhile significant increases in quoting prices of up to 50pc year on year in some cases are reported by JLL for the Dublin southwest sub-market where there is evidence of undersupply.

Further guidance as to the rate of increase in industrial values is offered by Allsop. It shows average prices increased up from €576 to €590 per sq m for Dublin industrials when comparing auction sales during the period May to September 2014 with the period from October 2014 and February 2015. That's an increase of 2.4 pc. During that time the number of Dublin properties sales fell from 40 to 26 and the combined value of sales dipped from €16.35m to €13.9m. Further evidence of increases values was seen in Allsop's gross yields which their agent Richard O'Neill says contracted from 11.53pc to 9.17pc for its Dublin industrials.

Values for regional industrial also increased over the same period from an average of €310 to €322 per sq m at a time when regional sales increased from 39 deals worth €11.18m to 48 sales worth €15.12m. Average regional yields showed a smaller decline from 11.51pc to 10.86pc.

Marie Hunt of CBRE reckons that Dublin prime industrial net yields contracted 25 basis points to 6.5pc in Q1.

JLL says demand is not confined to investors who require prime product, "there is also a noticeable improvement in demand from indigenous and UK owner occupiers."

Leasing demand "is leaning towards modern logistics buildings or facilities in under supplied submarkets such as Sandyford and Dublin Airport," he adds.

The largest letting deal in the quarter saw the 9,349 sq m distribution premises at 2010 Orchard Avenue, City West Business Park, where Harvey acted for the old and new tenants while JLL acted for the landlord, Irish Life.

Tougher Business Park portfolio in Naas, Co. Kildare, the biggest investment and development opportunity currently on the market, is due to got to best bids on July 24. DTZ and Savills are guiding €14 million for the portfolio which includes 70 assets with a gross floor area of 70,918 sq m and producing a gross annual rent of €1.8 million per annum. Its 161 acres includes 27.26 acres of industrial zoned land.

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