Residential developers join the race for industrial properties
Residential and other developers look set to compete with their industrial counterparts for industrial properties coming to the Dublin market.
As Cathal Daughton of Lisney points out “much of the Z6 (employment uses) zoned lands in Dublin City Council is under pressure to be redeveloped for residential purposes and we will see higher prices for this industrial land in western suburbs, such as the Naas Road and Longmile Road, and northern suburbs, like Baldoyle and Finglas/Glasnevin”.
Philip Harvey of William Harvey concurs saying that recently a UK-listed property development and investment company has written to owners within Dublin Industrial Estate in Glasnevin.
“Its approach has been to express an interest in diversification into industrial property and cites the estate as an attractive location for investment. Owners would be well advised to take independent specialist industrial property advice, particularly bearing in mind deal structuring and their future business premises requirements,” he says.
A particular test of this developer demand will be a 6.8-acre site on the Greenhills Road in Walkinstown, for which joint agents Savills and Agar Commercial are seeking offers in excess of €3m. The site, which contains a number of old warehouse buildings, is surrounded by other old industrial estates and like the site, they too are zoned ‘Regen’ which would facilitate enterprise and/or residential-led regeneration including offices and a hotel. Stephen Mellon of Savills says it has already attracted interest from residential developers.
Marie Hunt of CBRE points out that if the Government follows through on its suggestions that some other industrial estates may be rezoned for higher value uses such as residential, this will exacerbate supply pressures in the industrial and logistics sector.
She says demand for logistics and industrial accommodation predominantly emanates from logistics providers and says there are several active requirements from parcel delivery companies.
The strength of demand is reflected in take-up of accommodation, rising rents and hardening yields.
Gavin Butler of Savills estimates take-up at just over 97,000 sq m (1 million sq ft) in Q3 2018, which was double that for the same period last year. This brings total lettings in the first nine months of the year to around 220,000 sq m (2.368 million sq ft). About one third of that was in sales with the remainder in lettings.
Marie Hunt puts the nine month figures at 210,245 sq m (2.263 million sq ft ) which is 24pc higher than the corresponding period of 2017. “There were 39 individual industrial transactions signed in Dublin in Q3 2018 including some pre-lettings,” she adds.
Gavin Butler says the increase was “on the back of sustained improvements in the labour market and the strong consumer economy which continues to drive the circulation of goods throughout the country. As more goods are being transported throughout Ireland, we expect demand to remain strong for logistics space.”
Occupiers include food companies, logistics providers, couriers and parcel delivery companies.
In August, Cushman & Wakefield forecast that prime Dublin industrial rents would increase by 10pc to around €100 per sq m in the second half of the year and that yields could drop a further 25 basis points to 5pc. A similar trend could be seen in Galway with rents rising by almost 7pc to €80 per sq m. Limerick rents are expected to hold steady at only €59 per sq m. Yields in the provincial cities are also forecast to tighten.
However Marie Hunt says that prime Dublin rents are already achieving €106 per sq m and are tending stronger.
The largest deal this year, as reported in the Irish Independent, saw BlackRock Real Assets and Irish developer Michael O’Flynn acquire the former Hewlett Packard 195-acre campus in Leixlip, Co Kildare for a figure understood to be in the region of €51m in a deal which was brokered by CBRE.
The campus includes nine buildings with a total floor area of 1.47 million sq ft. Current occupiers include Hewlett Packard Enterprise, Celestica, MGS and Global Entserv Solutions. Some 600,000 sq ft of the built stock is vacant while 70 acres is primed for development. The new owners are planning to invest and rebrand it as Liffey Business Park.
Another industrial sale saw Friends First buy 15 Magna Business Park, Citywest, a 3,118 sq m (33,562 sq ft) building on 2.25 acres, for in excess of €3.8m.
In Dublin 15 a 26,361 sq ft property, 802 Northwest Business Park, Ballycoolin, was sold to private investors. William Harvey had been asking €1.95m.
Nearby 40 Rosemount Business Park, a 18,331 sq ft property, was sold to a property investment company which had a tenant lined up. William Harvey had been asking €1.5m.
A 17,050 sq ft building at 5/6 Jamestown Business Park, Finglas, was sold to an owner occupier for €960,000.
Philip Harvey says that his firm is currently involved in a number of off-market
The 6.8-acre site on the Greenhills Road in Walkinstown is zoned ‘Regen’ which would facilitate enterprise and/ or residentialled regeneration including offices and a hotel. Joint agents Savills and Agar Commercial are seeking offers in excess of €3m investment sales with lot sizes in excess of €5m.
The largest letting deal in Dublin this year saw the 12,494 sq m (134,484 sq ft), Unit 103 Northwest Business Park, Ballycoolin let to Sonas Bathrooms at an annual rent of €1.1m. Owners, Iput had undertaken a refurbishment programme and it is now generating an income yield on cost of 7.3pc. William Harvey and Savills were joint agents.
Siemens Healthcare Diagnostics Manufacturing took a lease on the 27,760 sq ft, 7 Swords Business Park on a 2.57 acre site at a headline annual rent of €220,000.
Both Rohan Holdings and Green Reit are undertaking new developments.
Rohan is due to complete construction of three large facilities. These include Units A7A and A7B in North City Business Park and Heron House in Dublin Airport Logistics Park. Savills are guiding annual rents of €199,700 and €200,100 respectively for the two semi-detached facilities of 1,850 sq m (19,913 sq ft).
Green Reit completed three further units at Horizon Logistics Park, including an 80,000 sq ft unit for Kuehne + Nagel. Green also began constructing Units D6 and D7 at Horizon and it also received planning permission for Unit D9 extending to 110,000 sq ft, which has been pre-let to Bunzl Plc. The Reit also acquired a further 28 acres of land at Horizon bringing its total land holding to about 300 acres.