This is even more impressive in the context of a market that has been severely constrained by supply with a vacancy rate of just 1.2% at the start of the quarter.

According to Gavin Butler, Director of Industrial & Logistics in Savills:

“We have noticed that pre-lets have started to play an increasing role in Dublin’s industrial and logistics market. Indeed, three of the top five deals this quarter were pre-lets and they accounted for almost a third of the space that transacted during the quarter. This reflects the lack of modern stock on the market, which has pushed occupiers who are seeking modern space to be more forward-looking with the occupational strategies.

“The dearth of suitable stock is particularly apparent in the sales market with only seven sales out of a total 23 transactions during the quarter. Despite accounting for almost a third of transactions, sales to owner-occupiers only accounted for 12% of the volume of space that transacted. This reflects a lack of opportunities for owner-occupiers with large requirements.”

“Based on our analysis, Q4 2021 will see the largest amount of speculatively built space coming to the market in one quarter since speculative development commenced back in 2016. In total, we will see 1.15 million sq ft of new space completed in Q4 2021, with 60% of this space already committed. This will bring the total amount of speculatively built space to 1.26 million sq ft for 2021, the largest amount of speculatively built space delivered in one year in the current cycle. 2022 will see the construction of 1.6 million sq ft of speculative space with almost 20% of this space already reserved.

“With pipeline supply well contained and limited standing stock we have seen upward pressure on rents: rents for prime stock have increased from €10.50 to €11.00 over the last year, representing an increase of 5%. This pressure has fed through to the secondary market which has seen rents increase from €6.50 to €7.25 over the period, an increase of 11%”

Gavin continued:

“We are seeing increased demand from 3PL firms which account for a growing share of the requirements coming to the market, which highlights the expansion of this sub-sector in the wake of Brexit. Indeed, employment in the transportation and storage sector, which includes logistics firms, grew steadily between 2013 and the end of 2019 increasing by 34% over the period. Like many sectors, the pandemic significantly reduced total employment which declined by 12.6% between Q1 2020 and Q2 2020. The sector now seems to be recovering since the end of the 2021 lockdown with last month’s Q2 2021 Labour Force Survey results indicating a quarterly increase of 10% in transportation and storage jobs.

Gavin concluded:

“While the sector is less reliant on labour than many other sectors of the Irish economy, this recovery is in the context of new requirements from several big-name 3PL firms, reinforcing the case that the logistics sector is entering an expansionary phase. We would expect this to be reflected in rising employment numbers and logistics accounting for a strong share of take-up over the coming quarters.”