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Vacancy rate hits 20 year low in Dublin logistics market as much needed new stock gets underway

Brendan Smyth • 08/10/2021

Occupier activity continues to surge in the Dublin industrial and logistics market as Covid-19 and Brexit drives structural demand changes. Latest figures by Cushman & Wakefield reveals a total of 228,200 sq m transacted in the year to date. This includes space taken up and also pre-let activity of units in the development pipeline. This compares to 176,650 sq m during the same period last year.


Commenting on the market, Brendan Smyth, Head of Development Land & Logistics, Cushman & Wakefield Ireland: “The lack of supply has become very evident during Q3, with a number of Grade C buildings being taken up. This is being driven by a relatively modest level of new product coming to the market and the majority of which is pre-let before the unit completes construction”


Demand in the market at present is evident across buildings in all locations and of all grades, with a number of large-scale requirements in the market. Large transactions in the year to date include the pre-let of 60,650 sq m at Unit E MountPark, Dublin 22 reportedly to Amazon. Elsewhere, 20,450 sq m was occupied by reportedly An Post, at the Former Lufthansa building on the Naas road, Dublin 12.


The market is poised to see more pre-let activity as availability levels within the market have grown increasingly tight. Just 258,625 sq m is available as of the end of September, an annual decrease of over 20%. Of this, just 20% is Grade A, while there are only four Grade A units greater than 5,000 sq m available. To further emphasise the availability shortage, the current figure sits below the long-run annual average for take up of 346,000 sq m.


The decline in availability, which reflects a vacancy rate of just 6%, the lowest rate in over 20 years, is a result of a number of factors. On the supply side, limited development activity for the past decade and exceptionally low levels of market churn in the past year have both played a role. The market has also recorded a loss of some stock for redevelopment purposes, a feature evident across other markets in Europe also.


Positively, a total of 210,450 sq m of space was under construction at the end of Q3 2021 which is due to be delivered over the next 15 months. Already, 96,650 sq m of this is pre-let however market intelligence indicates further pre-lets are expected to occur as these units progress towards completion.


Lastly, the increased occupier demand for industrial and logistics space is mirrored, if not surpassed by investment activity. Occupiers are facing intense competition from investors across all vacant units, leading to in most cases, occupiers being outbid by investors.


Commenting on the market, Kate English, Chief Economist, Cushman & Wakefield added: “Overall, investment in industrial and logistics created total capital inflow of just over €445m in the year to date according to Cushman & Wakefield’s investment market database. This total includes income generating assets and a forward fund transaction from the second quarter, a deal type of which more are expected in the asset class. The volume surpasses all annual records for the asset class since their detailed series began.”


Unsurprisingly, yield contraction is also evident, with prime Dublin yields set to fall below 4% by year-end, another record first for the asset class in Ireland.


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