Summary
- Supply increased by 28% year-on-year and 3% quarter on quarter
- Take-up for q2 2010 was approximately 17, 309 sqm, 27% less than the same period of 2009
- Potential occupiers can obtain very attractive rental deals with significant incentives (such as fit out and / or rent free periods)
- Evidence of some sales activity
- There will continue to be little or no speculative development
- Download Lisney Industrial Update Summer 2010
Activity
Take-up of accommodation for Q2 amounted to approximately 17,309 sqm, almost 70% less than that taken-up in Q1. This dramatic drop was to be expected bearing in mind the very large volume of lettings in Q1 to logistics operators who took advantage of competitive rents and flexible terms on larger space. Half-year total take-up equates to approximately 75,000 sqm.
Q3 figures are likely to be greater than Q2 given the number of deals that are agreed but not yet completed. We anticipate that by year-end total take-up should reach 130,000 sqm, a 30% increase on 2009 figures.
Following an absence of sale transactions in Q1, there has been some evidence in Q2 of purchasers entering the market once again. However, these sales will continue to be limited until such time as finance becomes more readily availability.
Supply increased by approximately 28% year-on- year, up from 867,844 sqm in Q2 2009 to a current availability of approximately 1,109,154 sqm. However, it has only increased by 3% in the three months to the end of June.
Availability
With subdued demand and increasing supply, vacancy levels continue to rise albeit at a much reduced pace. The Dublin south region is the only geographical sub- sector where availability reduced in the quarter. All other regions experienced an increase.
Merger, take-overs and consolidation continue to be common practice and this is beginning to create some movement with medium-sized units (between 1,500 and 2,500 sqm). As witnessed through the relatively significantly take up by logistics operator in Q1, the trend towards warehouse outsourcing to such companies continues.
Demand
Potential tenants in the market are naturally indecisive regarding property decisions given the uncertainty surrounding the short to medium-term prospects of their business. This is reflected in the flexibility they require when taking a new lease. Potential occupiers can obtain very attractive rental deals with significant incentives (such as fit out contribution and/or rent free periods).
Industrial Production, Turnover & Exports According to the CSO, the seasonally adjusted volume of industrial production for manufacturing industries was 8.5% higher in the three-month period February to April 2010, when compared to the preceding three months. Additionally, the CSO's industrial turnover index for the same period shows a 7.8% increase. Both of these figures provide some positive news for the manufacturing industry.
When these production and turnover figures are considered in conjunction with the annual 13.5% increase in the quantity of freight passing through Dublin Port at the end of March, it is even more encouraging. The extra competitiveness that Ireland can now provide with lower rents and the availability of workforce needs to be marketed strongly abroad. This, combined with the infrastructural projects just completed or close to completion such as the major inter-urban motorways, the Limerick Tunnel and T2 at Dublin Airport can all play a role in continuing to attract further business into the country, as will the further planned infrastructural improvements such as the 'DART Underground'.
Outlook
While there was a substantial decrease in take-up this quarter compared to Q1, this is not surprising given the large figure achieved in the opening three months of the year. We expect the year-end take-up to be well ahead of 2009 between 120,000 sqm to 140,000 sqm. There will continue to be limited sales transactions and no speculative development. Consolidation in many industries will present opportunities for well-positioned companies to acquire buildings both on a purchase and lease basis. There will continue to be a wide variance in the rental levels achieved. Most companies will continue to require flexibility when leasing short- term space and all occupiers will be seeking improved premises and locations, which provide better value for money.
