Overview
Vacancy decline was halted this quarter as the amount of available accommodation increased by 3%, despite an increase in take-up. The most notable trend over Q3 was an increase in the number of transactions, albeit for smaller buildings.
Take-Up
Q3 take-up was just over 38,000 sqm, up 3% on the same quarter of 2010. The average take-up per quarter over the last 12 months was approximately 35,000 sqm and as such, the Q3 figure points towards continuing steady demand. This is positive news for the industrial market.
Approximately 33 transactions were completed, six of which were sales. This is a significant jump from Q2 when 17 deals were concluded. For the last 18 months, the average number of transactions per quarter has been approximately 21. Despite this increase in the number of transactions, the overall volume of take-up has not changed drastically. What has changed is that the individual properties being transacted are smaller in size.
There were no transactions over 5,500 sqm (compared to two large deals in Q2). Two transactions made up the 4,000 sqm to 5,500 sqm grouping, seven in the 2,000 to 4,000 sqm and two between 1,000 and 2,000 sqm. There were 22 deals of less than 1,000 sqm, mainly in the south-west region. This compares to only 11 in Q2, and these were mainly located in the north-west.
Overall, the south-west region experienced the greatest levels of take-up and included a number of notable transactions. Specifically, the sale of the former McCormack McNaughton premises on the Naas Road (4,557 sqm) and the letting of Oak House on Oak Road in Western Industrial Estate (5,229 sqm). Also in the south-west, Google purchased 11 acres with 3,734 sqm of buildings at Profile Park in Grange Castle. Google intend to convert the existing accommodation into a specialised energy efficient data centre and plan to have the facility fully operational in 2012.
|
Q3 Notable Transactions |
|
Property |
Region |
SqM |
Transaction Type |
|
Oak House Western Industrial Estate |
South-west |
5,229 |
Letting |
|
Former McCormack McNaughton Premises Naas Rd |
South-west |
4,557 |
Sale |
|
Unit 1 Poppintree Industrial Estate |
North |
3,534 |
Letting |
|
Unit 29 Cookstown Industrial Estate |
South-west |
2,058 |
Sale |
Availability
Available accommodation decreased by 2.6% year-on-year to stand at a current supply figure of 1.13 million sqm. Availability began to fall in the latter months of 2010 and this trend continued in the opening half of the year (down 1% in Q1 and 0.5% in Q2). However, Q3 was not so positive. With more premises coming to the market through receivers, this quarter experienced an increase once again and supply rose by about 3% over the three months.
The overall Dublin vacancy rate now stands at about 17%, but there are wide variations across geographical areas. The south and south-west has the lowest vacancy rates at about 10% and 13% respectively, whilst the north and north-west are much higher at 29% and 20%.
Demand
Demand is mainly being driven by logistics operators connected with the food and medical sectors. However, this demand is not to the same degree as in 2010, when almost all significant requirements stemmed from logistics companies.
As is the case for the past two to three years, potential occupiers can obtain very attractive rental deals with significant incentives. Prospective tenants remain uncertain of their future and this is being reflected in the flexibility they require, and achieve, when taking a new lease.
Rental and Capital Values
Despite the increase in sales activity (i.e. six transactions in Q3 to owner occupiers) and the exceptional value that is available given the depressed price levels, limited finance is continuing to restrict this section of the market. Modern units are now beginning to sell for prices in the order of €750 to €850 psm, with secondary stock at about €450 to €550 psm and tertiary stock at €300 to €400 psm.
Rental values weakened during the quarter and remain under pressure. Lisney commercial rental indices show a decline of 2.86% in Q3 and 45.16% since the peak of the market in the latter half of 2007. Consequently, rents now represent excellent value. Modern accommodation is achieving €55 to €70 psm, secondary stock €40 to €50 psm and tertiary, €30 to €40 psm.
Summary
• Q3 take-up was just over 38,000 sqm.
• 33 transactions were completed in Q3, six of which were sales.
• There were 22 deals done of less than 1,000 sqm, mainly in the south-west region.
• With more premises coming to the market through receivers, supply rose by about 3% in Q3.
• The overall Dublin vacancy rate now stands at about 17%.
• Limited finance is continuing to restrict the owner-occupier end of the market.
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