Download Market in Minutes Dublin Industrial Market

Savills World Research
Ireland Industrial
Market in Minutes
Dublin Industrial Market
Industrial Property Take-Up
160,000
140,000
120,000
100,000
80,000
60,000
40,000
There are perhaps two more convincing explanations for the
year-on-year decline in industrial take up. Firstly the Q3 2016
take-up figure is being compared with an exceptional Q3 2015
when 141,000 sq m of industrial space was let or sold – a record
for the Dublin market. In fact, although it is almost 40,000 sq
m down on Q3 last year, this year’s Q3 take-up remains among
Q3 2016
Q2 2016
Q1 2016
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
FIGURE 2
Monthly Goods Trade Volumes between the
UK and Ireland (3 month moving average)
1,700
1,600
1,500
€m
1,400
1,300
1,200
1,100
Source: CSO
Irish Imports from UK
Aug-16
Jun-16
Apr-16
Feb-16
Dec-15
Oct-15
Aug-15
Jun-15
Apr-15
Feb-15
Dec-14
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Oct-13
Dec-13
Aug-13
Apr-13
Feb-13
Oct-12
Jun-13
Brexit
Dec-12
1,000
Aug-12
Gross take-up of industrial property in Q3 was just shy of
102,000 sq m. This represents a year-on-year decline of around
28 percent and brings total take-up for the first nine months
of 2016 to over 221,000 sq m. Some commentators have
attributed this to a sharp post-Brexit fall in the value of Sterling
which should, in theory, create a headwind for Irish exports. We
are not entirely convinced by this argument. Firstly, as shown
in Figure 2, goods exports from Ireland to the UK have actually
risen since Brexit despite the currency swing. In the longer
term we agree that weak Sterling is likely to drag on exports
to the UK, and this may impact negatively on the demand for
manufacturing and logistics space. However the same logic
dictates that weak Sterling should have a positive effect on
imports from Britain. Therefore it should boost the demand
for logistics space to warehouse incoming goods. Given that
Ireland’s merchandise imports from the UK exceed our exports
to that market, the long-run impact of the currency shift could
be a net positive for logistics demand.
Q2 2013
Long-Run Avg
Source: Savills Research
Market Activity
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2011
Q3 2011
Q2 2011
Q1 2011
0
Q4 2010
20,000
Q3 2010
Ireland’s economy has continued to outperform since our last
report. Employment is now rising by 2.9 percent per annum
– the third fastest growth rate in the EU. This has contributed
to increased earnings which, along with modest tax cuts over
three successive Budgets and a resurgence in consumer credit,
has fuelled the demand for goods. The flow of goods through
the Irish economy therefore continues to increase. After a
record year in 2015, Dublin Port has registered even stronger
activity in 2016, with cargo volumes up 6.8% in the opening
nine months. This has had a knock-on impact throughout the
supply chain. Logistics firms continue to expand their fleets,
with vehicle registrations up 24% in the year to Q3, while the
demand for warehousing space continues to rise.
FIGURE 1
Sq. M.
Introduction
Q3 2016
Irish exports to UK
the strongest in the current economic cycle and is 62 percent
higher than the long run average.
A second factor behind the slowdown compared with last year is
simply the challenge that occupiers face in finding good quality
industrial space in an ever-tightening market.
savills.ie/research
01
Market in Minutes | Dublin Industrial Market
Rents and Yields
With the availability of good
quality stock diminishing, prime
industrial
rents
are
growing
strongly. According to MSCI’s ERV
index, rents increased by 9.2%
in the year to September and
we believe headline rates now
stand at approximately €85 per
sq m per annum. Prime industrial
yields have compressed by 90
basis points over the past twelve
months and are currently in the
region of 6.8%. As a result capital
growth continues to outpace rental
growth and values have risen by
12.6% over the same period.
OUTLOOK
There is now a general scarcity of good
quality units across the greater Dublin
area, with obsolescence an issue for a
significant proportion of the remaining
available
stock.
Although
most
occupiers would prefer to buy rather
than rent, the yield profile of existing
units and the fact that properties
bought between 2011 and 2014 must
be held for seven years to avail of the
Capital Gains Tax waiver, means that
the number of units coming up for sale
is limited. This is compounded by the
fact that construction of new industrial
property has only just resumed with
Rohan Holdings and Green REIT leading
the way with developments at Dublin
Airport Logistics Park and Horizon
Logistics Park respectively. With
capital values rising strongly, however,
further speculative development and
the delivery of new space will be a key
feature of the market in 2017, particularly
in north Dublin. However, with prime
values still below replacement costs, the
potential for further capital and rental
growth in a tightening market remains
in place.
Savills Industrial
Please contact us for further information
Gavin Butler
Director, Industrial, Savills Ireland
+353 (0)1 618 1340
[email protected]
John McCartney
Director of Research, Savills Ireland
+353 (0)1 618 1427
[email protected]
Stephen Mellon
Negotiator, Industrial, Savills Ireland
+353 (0)1 618 1366
[email protected]
Sean O’Malley
Economist, Research, Savills Ireland
+353 (0)1 618 1478
[email protected]
Niall Woods
Negotiator, Industrial, Savills Ireland
+353 (0)1 618 1725
[email protected]
Elaine Gordon
PA & Team Administrator, Industrial
+353 (0) 1 618 1313
[email protected]
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