Demand for warehouse space is exceeding supply, while in Dublin office space has seen a slump, according to estate agency Jones Lang Lasalle.
In a Q1 2022 analysis, JLL says that occupiers, especially in e-commerce, are scrambling to find suitable locations.
“Space is scarce for large fulfilment centres, parcel hubs, online grocery fulfilment, and dark kitchens,” says the report. “Any existing stock on the market will remain an attractive prospect for investors.”
JLL tallied €760m of commercial property investment transactions Q1 2022.
Most investor focus is on buy to let, with 50% of volume in the quarter, the same as last year. The industrial sector accounted for 25% of deal values and offices 21%.
In Association with
The largest deals in the quarter included:
+ Project Ruby, a portfolio of student accommodation in Dublin and Galway (€145m)
+ A pre-let Distribution Centre by Primark, in Newbridge, Co. Kildare (€128m)
+ A confidential PRS scheme (€85m).
JLL Ireland chief executive John Moran commented: “Pipeline supply remains a prominent issue for the industrial sector and it is unlikely to meet demand in the near future. This is being compounded by the rising costs of construction and labour, which will continue to drive rents up in both prime and secondary locations.”
Take-up in the Dublin office market through q1 was 477,000 sq ft across 40 deals, according to property advisor Savills. That’s 24% below the ten-year Q1 average and 57% below Q1 2020.
City-centre stock accounted for 81% of total space taken and for all of the top five deals.
The Exo Building on the north docklands saw the largest deal of the quarter, as An Post leased 79,000 sq ft. The deal drove the share of space taken by the public sector to 17%, well above the 11% ten-year quarterly average.
After a fall in market share last year, accounting for 31% of take-up for full-year 2021, tech firms have made a return as the most active sector with over 220,000 sq ft leased and a market share of 47% in Q1.
The largest tech deal took place at the recently completed 10 Hanover Quay, which American fintech firm Fiserv leased in its entirety. Currently located in Clonskeagh, Finserv plans to expand its Irish workforce by 300 employees.
John Ring at Savills commented: “With office occupier employment having grown during the pandemic but strategic office decisions effectively stalled, key decisions on real estate portfolios now need to be made. We believe that there is a significant amount of pent-up demand that will be released in 2022.
“We expect employers to use high-quality fit-outs and centrally located space to encourage workers to return to the workplace.
“Uncertainty remains regarding the final shape of the proposed hybrid model, but best practice will inevitably emerge over the course of 2022 as occupational theory meets practice.”
Vacancy rate
CBRE Ireland estimates that the capital’s office vacancy rate is currently 8.2%, down from 8.5% at the beginning of the year, and that Q1 2022 was characterised by the signing of many small office leasing transactions.
According to CBRE research, 42 office lettings were signed in the Irish capital in the first three months of 2022, with the average deal size in Q1 being only 1,080 square metres.
CBRE’s Alan Moran commented: “Rather than focusing solely on the volume of leasing completed in the quarter, we take encouragement from the volume of outstanding requirements in the market, and the fact that more than 107,500 sqm of office stock in the capital was reserved at the end of Q1.”
CBRE say that prime headline quoting rents in the city centre were c.€629 per square metre (€58.50 per sq. ft.) at the end of Q1. Prime office yields in the capital are 4%.
