In the first half of the year, 45% of the space was attributed to 3rd party logistics firms, reaching a total logistics share of 69% when combined with 1st party logistics firms. However, the second quarter witnessed a more diverse occupier base, with industrial uses accounting for 36% of the market share. This included deals from manufacturing companies and recycling/waste management operators, along with a mix of other business uses.

1st party logistics is when a company stores their goods themselves and transports them to the end user. 3rd party logistics is when a company outsources elements of their supply chain, including distribution, warehousing, and fulfilment to third parties.

The expansion of logistics firms in Ireland is in response to the significant growth of e-commerce, which saw increased activity during the pandemic due to online shopping becoming a necessity. Large names who have taken space in Ireland over the past year include Amazon, DHL, UPS, DB Schenker, Fed Ex, and Maersk. The expectation is for further growth following either the entry or expansion of three of the top five global shipping firms into the air cargo market. This diversification of supply chains is unsurprising given the pressure placed on supply chains during the pandemic. One deal, namely CMA CGM’s acquisition of Bolloré Logistics will reportedly add warehousing demand in 63 countries of about 9.7m sq ft across 115 warehouses.

In addition, pharmaceutical investment continues to arrive, despite recent falls in pharmaceutical exports. Many leading industry names have established significant operations here and continue to commit including AstraZeneca subsidiary Alexion which has lodged plans for a new manufacturing facility in Blanchardstown. In addition, further deals are expected to be announced by the IDA in the coming months, furthermore highlighting the level of commitment from these firms.

Jarlath Lynn, Director of Industrial and Logistics, commented:

“Logistics operations have expanded both with demand created by a growing population and increased e-commerce purchases, but also with relocations due to Brexit. Dublin benefits from access to European and UK markets while also having short distances between the port and the airport. On the other hand, the commitment of global pharmaceuticals is a positive indication of the occupational market despite any short-term decreases in exports. In addition, this quarter we were involved in a significant 300,000 sq ft acquisition in North Dublin for alternative industrial uses, which is a further indication of strong market sentiment.”

While construction activity has increased steadily this cycle, demand for modern units (units built since 2000) continues to outstrip supply and units have typically pre-let prior to completion of construction. While the vacancy rate rose marginally from 1.3% to 1.6%, there remains just six out of 45 units were built since the 2000s and are available to let. Of these, four of them were brought to market this quarter and are expected to let within the next few months. The largest unit is Site R, Aerodrome Business Park which measures 240,000 sq ft and has received significant levels of enquiries.

The continued prevalence of legacy units in the availability aspect of the market indicates the preference of occupiers for modern units. By no means, however, does this mean that the tight supply dynamics are easing and the same is true across Europe with a 3.5% vacancy rate across the continent.

Looking ahead, there remains 495,000 sq ft to be delivered in the final six months of the year following a significant quarter of delivery in Q2. The pipeline of speculative development is due to slow next year to around 1.0m sq ft before increasing again to 1.6m sq ft in 2025.

Jarlath continued:

“Due to the continued supply dynamics, rental levels increased a further 2% on the previous quarter to €12.75 psf for prime units and €9.50 psf for secondary units. Modern units remain the highest in demand and tend to remain available following completion for short periods of time before being taken up. However, given the lack of supply, suitable older units will also see a very limited time period on the market.”