Scant supply and strong demand driving Cork's industrial market
Strong demand for space and a shortage of supply is pushing up rents in Cork's industrial market. According to Cushman & Wakefield, rents grew by 13.3pc during 2018, to €85 per sq m and Peter O'Flynn, its managing director in Cork, is forecasting further inflation of 5.9pc this year, lifting prime rents to €90 per sq m.
One of the factors is the shortage of prime stock and Denis O'Donoghue of CBRE estimated that over the past 12 years only three buildings were developed with a combined 11,427 sq m (123,000 sq ft). "Vacancy has trended down rapidly over the past two years as the economy expands and grows," he added.
Mr O'Flynn agreed. "Approximately 88,850 sq m of space was available at the end of Q4 2018, a fall of 30pc over the year," he said.
"Strong transaction activity, combined with the removal of a number of units, which are to be redeveloped for alternative uses or are no longer being marketed, and limited completions, all played a role and the vacancy rate declined from 10.3pc at the end of 2017 to 5.8pc - the lowest level since 2007,"
Mr O'Donoghue said investment yields for Grade A product are currently trending at around 6.25pc. He has identified the new buildings as including those of IPL Plastics and Kings Laundry, which occupy a combined 72,000 sq ft within the Goggin & Buckley Industrial Estate in Little Island. In 2018, John Cleary's JCD Group developed 50,000 sq ft in Blarney Business Park off the Cork Limerick Road and let the building to two tenants, ILC Dover and GLS Logistics. Last autumn, a letting there secured €86.11 per sq m (€8.00 per sq ft).
JCD recently broke ground on a further 60,000 sq ft unit in Blarney which is due for completion in August.
Owner occupiers continue to expand, particularly in the biopharma and med tech sectors, notably Stryker, Abbvie and Gilead Sciences. At a local level, furniture retailer EZ Living and fruit and veg wholesaler All Fresh are among those also expanding in Little Island.
While much of the newer industrial space is suburban, unlike Dublin, Cork's space is located on all four sides of the city from Blarney to the north, Cork Airport through to Ringaskiddy to the south, Carrigtwohill to the east and Ballincollig to the west.
CBRE has mapped each building and occupier and discovered there is 20,780,000 sq ft of industrial space and some 1,560 occupiers. The largest concentration of stock is on the south side, accounting for around 6m sq ft, followed by Little Island at 4.2m sq ft, Cork's north side with 2.75m sq ft, Carrigtwohill with 1.67m sq ft and Ballincollig with 1m sq ft.
However less than a quarter, or 4.5m sq ft, is Grade A space, 10.2m sq ft is Grade B and 6m sq ft Grade C. As buildings age there is a strong drift from Grade A to B.