The outlook for 2005 is positive, with events like the opening of the Dublin Port Tunnel late next year boosting business in north Dublin. Justin Comiskeyreports
After a few years of taking a back seat to the runaway success of the retail sector, there are signs that the industrial sector may put in a decent performance in 2005 after a year of steady progress in 2004.
"The outlook for 2005 is for the increased levels of demand to continue, fuelling a return to large scale speculative development and a subsequent upward shift in rental and capital values," says Gavin Butler, associate director of Hamilton Osborne King.
Garrett McClean, head of industrial at CB Richard Ellis Gunne, concurs: "The outlook for 2005 is a positive one with increased levels of transactions and speculative development anticipated, particularly in the first two quarters."
However, Bill Tuite of Jones Lang LaSalle warns that many occupiers have "latent capacity" and, should market conditions pick up, many companies will "just use up more of what they already have".
"I'd describe the performance of the industrial market in 2004 as satisfactory," he says. "Next year might be a little bit better but it's steady as she goes.
"It's worth remembering that rental levels have not really moved in four years and that there's been very little spec development of late. Most of the action is with small, owner-occupier sales at the moment."
Many commentators point to the ongoing growth of the economy to provide the bulk of demand for space as indigenous owner-occupier firms expand to service growing markets. Healthy demand for units below 1,000 sq m (10,764 sq ft) is proof of this assertion.
In addition, the opening of the Dublin Port Tunnel - expected for late in 2005 - is proving a boon for north Dublin locations where vacancy rates are down sharply and land values are up.
One example of this is where a sale has been agreed recently on just over three acres of land on the old airport road for over €1 million an acre. And a 20-acre parcel of land at the Northwest Business Park in the Ballycoolin area of west Dublin sold to a developer for €9 million recently.
Another sign of a market on the up is the reported sales of two very large industrial buildings in IDA estates that had been on the market for some time. The former Gateway facility at Clonshaugh in north Dublin with 30,657 sq m (330,000 sq ft) - first offered for sale in October 2001 for €25 million - was sold in September for around €16 million.
In addition, the 50,000 sq m (500,000 sq ft) former 3Com high tech campus at the Ballycoolin Business Park in Blanchardstown, Dublin 15 is believed to be sale agreed for less than €30 million - it was originally guided at over €40 million.
One of the larger deals in the last quarter of 2004 was the sale of an 8,000 sq m (86,111 sq ft) hi-bay facility to Michael McLoughlin & Sons Hardware at Northern Cross Business Park on the M50/N2 junction for €9 million. Over in north-east Dublin, Damestown has started construction on the Turvey Business Park off the N1/M1 junction with over 50 per cent of the development reserved off plans.
Cathal Daughton, a division director at Lisney, expects take-up in 2004 to be around 265,000 sq m (2,852,433 sq ft) - up 4 per cent on 2003 - while the vacancy rate is expected to be 12-13 per cent by year-end.
"Tenants are still hard to find in some cases," he says, "but there is huge demand for well-located product near good transport links. Older estates near the Dublin Port Tunnel in places like Santry and Swords will experience some redevelopment in 2005 and there will be a return next year to speculative build, but only in locations with good transport links."
Lisney notes that capital values of between €1,300-€1,400 per sq m (€120-€130 per sq ft) are currently being achieved for modern units of up to 500 sq m (5,382 sq ft). Quality second-hand properties are selling for around €860-€1,080 per sq m (€79-€100 per sq ft) while properties of up to 500 sq m (5,382 sq ft) are realising rents of around €100-€110 per sq m (€9.29-€10.21 per sq ft).
"Industrial space in south-east Dublin/north Wicklow is set to have the highest rates of growth going forward," says Gavin Butler. "This is due to the fact that the supply of industrial accommodation is decreasing in the region as older industrial buildings and sites are redeveloped for higher value uses, including offices, apartments and retail warehousing. Evidence of this can be seen in Sandyford Industrial Estate where higher value uses are benefitting from the estate's proximity to the new Luas line and the M50/Sandyford interchange.
"The opening of the Dublin Port Tunnel will see demand increase in and around the tunnel entrance at Clonshaugh. Twelve months ago there was around 50,000 sq m (538,195 sq ft) of vacant space at Clonshaugh Industrial Estate - now it's all sold. Two schemes near Balbriggan - the M1 Business Park and Fingal Bay Business Park - will also continue to benefit from the ongoing improvement of the M1."
Garrett McClean says 2004 was dominated by owner-occupiers "taking advantage of low interest rates, as opposed to significant levels of letting activity". He expects over 300,000 sq m (3,229,170 sq ft) of industrial space to be transacted this year with "the bulk of demand coming from indigenous operators as opposed to overseas companies".
"Approximately 27,358 sq m (294,479 sq ft) of space was let in Dublin in the first three quarters of 2004," says Mr McClean, "while a further 165,262 sq m (1,778,864 sq ft) was sold. The majority, 36 per cent, of this activity took place in the Dublin south-west N7 corridor, with the Dublin north-east N1/M1 corridor accounting for 28 per cent and the Dublin south-west N81 corridor accounting for 13 per cent.
"Prime industrial land values have now stabilised at €500,000-€650,000 per acre on the northside of the city and between €600,000 and €850,000 per acre on the southside.
"One factor that may see prices stabilise would be the rezoning of industrial land in South Dublin County Council, of which 490 acres has been ear-marked."
