Covid and Brexit pressures combine to drive record levels of investment in logistics
Online retailing and Brexit have boosted demand for logistics and industrial space, which could result in the completion of more than 1.8 million square feet of new stock this year.
This is already the strongest year on record for investment in the sector, with the first half of the year seeing sales drive the overall investment in logistics/industrial space to €413m. According to Savills, increasing investor interest in the limited opportunities afforded by the sector is placing downward pressure on prime yields, which are now 4.25pc.
“We are aware of several new-build industrial assets which are due to come to the market later in the year, and we expect these to achieve yields in the region of 4pc,” said Gavin Butler, director of industrial and logistics at Savills. Among the deals due is the Core portfolio, which is expected to transact for more than €170m.
Marie Hunt, head of research at CBRE Ireland, said lockdown demand for online retail has also benefitted the sector
”Activity has been largely concentrated in the greater Dublin area – though there has also been encouraging activity in the Cork market, with several transactions signed in the first half of this year and other deals in active negotiation,” she added.
Her colleague Garrett McClean said a shortage of modern accommodation continues to be a significant frustration for industrial occupiers in Dublin, with most new buildings being pre-let prior to practical completion.
“It is therefore encouraging to see developers reacting to the shortage of standing stock, and lodging planning applications for new schemes and additional phases of existing schemes,” he added.
CBRE estimates that 647,450 sq ft was taken by occupiers during the second quarter – up more than 15pc on the previous quarter. This brings total take-up in the Dublin market in the first half of 2021 to more than 1.2 million square feet compared to over 1.44 million square feet in the same period in 2020.
In addition, a large volume of accommodation is currently reserved, which will translate into transactional activity in due course, signalling a strong second half to 2021.
Among the recent lettings arranged by Savills was the 45,000 sq ft Unit A7 North City Business Park, which Harvey Norman is occupying.