Domestic economy driving industrial space

A recovering domestic economy is driving strong growth for industrial space as investors turn their focus to logistics and distribution space.

According to Savills Ireland, take-up of industrial space in Dublin is starting to pick up, with over 220,000 sq m passing hands so far this year — more than twice the mid-year figure of 2014 and already 17% ahead of last year as a whole.

A key contributor to this growth is recovering consumer demand which is increasingly driving a need for industrial space in place of manufacturing which traditionally performed this role.

“Industrial property is perceived as somewhat un-glamorous and often lags behind offices and retail in a recovery situation,” Savills director of research Dr John McCartney said.

“However, the rebound in Ireland’s consumer economy is now generating strong demand for logistics and distribution space. With the economy expected to continue performing well and with no industrial units currently being built, this has led rental growth which is now attracting owner-occupiers and investors.”

Demand for industrial property outside the capital is showing signs of following suit with a number of significant deals concluded in the first half of the year.

However, many regions are yet to experience the economic growth seen in Dublin .

Despite prime industrial rents climbing 6% in the first half of the year, strong demand from owner-occupiers is driving purchase prices north at an even faster pace as yields remain attractive.

Following a period of little or no new development, new stock of industrial property is likely to begin coming on stream next year, said Dr McCartney.