‘Significant decline’ in warehouse sector activity despite annual jump

Activity in Dublin’s logistics and industrial market slumped dramatically in the final months of 2022 despite a sharp rise in take-up for the full year compared with 2021, a new report by Savills Ireland has indicated.

The property agent said that total factory and warehouse take-up reached 2.9 million sq ft in 2022, up more than one fifth on 2021 and just ahead of the average for the past five years.

The average deal size of 40,350 sq ft in 2022 was the largest since Savills began tracking the data in 2014.

However, Savills said there was “a significant decline” in the size of deals being made in the fourth quarter with just 15 transactions completed, the lowest volume on record. The average deal size for the period between October and November was 22,500 sq ft, down sharply from the 54,000 sq ft recorded between July and September.

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Meanwhile, the vacancy rate increased from 1.4 per cent in the third quarter to 1.6 per cent in the fourth quarter. Savills said this was mostly driven by the number of vacant “legacy units” built before 2000 with just one out of the 39 vacant units having been built in the last decade.

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“The increase in the availability of legacy stock, combined with current unit specifications sought by the market, present an issue of suitable supply,” Savills said. “Firms generally do not wish to refit older buildings, and so these units are generally unsuitable for modern occupiers. The gradual addition of new stock is likely to slow the absorption of legacy stock in the short term, explaining why vacancy has risen despite ample market demand.”

Overall, however, 2022 was a strong year for the sector with the logistics subsector, in particular, driving take-up.

Irish property group Iput Real Estate’s pre-letting of more than 380,000 sq ft at Quantum Logistics Park near Dublin Airport to DHL and Maersk represented the largest and third largest deals in the capital last year.

The second largest deal was Amazon’s pre-letting of 200,000 sq ft at Northwest Logistics Park in Ballycoolin.

“The activity in the Dublin industrial and logistics market was robust in 2022,” said Jarlath Lynn, director of industrial and logistics at Savills Ireland. “Firms sought additional space to further capitalise on the continued growth of the Irish economy in coming years. While supply-chain bottlenecks, weakened consumer sentiment and high levels of inflation posed numerous challenges, the resiliency of the sector was demonstrated in 2022.”

He said: The market continued to exhibit strong demand this past year, with 2.9 million sq ft of stock let. With the current demand-supply imbalance unlikely to be completely addressed in 2023, we foresee a continued increase in the number of pre-lettings and a low vacancy rate.”