Rent hikes on way for Grade A industrial units
INDUSTRIAL rents are set to rise sharply in certain parts of the country this year, as a lack of suitable property in the right markets pushes prices up.
According to a new report from DTZ Sherry FitzGerald, there is still ample supply overall, but the amount of industrial property, such as warehouses and storage centres, in the right areas remains limited and there is little sign of any uptick in the market.
Only seven large, grade A sites remain outside Dublin, the company claims.
The report, which follows a similar narrative to the office market, shows that transactions in the sector last year increased some 49pc year on year in 2013, and that trend is likely to continue into 2014.
About 357,700sqm changed hands last year, up from 262,900sqm in 2012.
Much of the growth was driven by Dublin, which accounted for 83pc of the overall growth.
The DTZ report paints a mixed picture about the state of the industrial sector today.
"The Irish industrial market continues to display a wide range of vacancy ratios, from 12pc in Galway to 27pc in Dublin. Supply levels remain elevated across all the regional centres, primarily as a result of the ongoing release of second hand space back to the market.
"This activity continues to hamper net absorption levels which remain at historically low levels," the firm added.
"Supply levels remain fragmented with a shortage of larger Grade A space in all the prime markets. An occupier with a requirement for a Grade A unit, greater than 5,000sqm is limited to just seven buildings across all regional centres," DTZ claimed.
What rent increases do take place in 2014, are likely to be focused mainly on Dublin.
Activity levels across the regional centres of Cork, Limerick and Galway remained "somewhat mixed" in 2013.
Despite that, the markets have made "significant inroads on the path to recovery", according to the report, with the number of deals expected to rise this year.
While leasehold transactions continue to dominate the market when it comes to the type of deals being done, there is increasing demand for freehold purchases to be pushed through.
This trend was "particularly evident in Dublin and to a lesser extent across the regions as industrial occupiers are beginning to see real value in the market," the report claims.
Deal volumes are also expected to climb in 2014 as owners look to take advantage of the capital gains tax exemption which is due to expire at the end of this year.
In any case, DTZ makes clear that the old problem of a lack of finance continues to hold back potential investment.