INDUSTRIALMARKET: Demand for industrial space has declined but short term leasing hasn't fared too badly

THOUGH THE buying and rental of industrial sites and buildings declined throughout 2008, signs are that well negotiated rental deals could offer a way forward.

Lisney, in its third quarter report, says that despite "a further decline", demand in the rental market has increased, especially for lettings of between one and five years.

The Lisney experience is that companies want flexibility to develop business over the short-term and that landlords/developers are prepared to offer future purchase and other options.

Keith Begley of the Lisney industrial team says that "even allowing for lower levels of activity there is still a good turnover on leasing. Companies are looking for leases to tie-in to contracts - two-year leases for a two-year business deal. Landlords are looking at the short term too. The combination of right time, right place and right company has never been more important. People don't want to buy sites either and then be caught with land on their hands."

Nigel Healy of Jones Lang LaSalle agrees that "the majority of people are leasing and deals actually happening tend to be rental ones. People renting long-term are looking for flexibility in agreements as in rent-free periods and break options. The market is more difficult and I expect it to become even more so, but prices and land values will have to adjust accordingly."

In a breakdown of the situation across the capital, Healy says "there is a big overhang of units in north-west Dublin, mainly of the smaller units popular with the kind of small business hit by the economic downturn. There is no such overhang in the north-east of the city, the south-east has some but not a lot and there is nothing massive in the south-west either."

Lisney's Keith Begley says significant purchases have gone through in the last few weeks and that "people are now of a mind to see where the market is going next year. Realistic purchase values are coming through and will probably be down 40 per cent on last year's prices."

The Lisney report shows that, while supply is up 16 per cent on 2007, take-up is down by about 24 per cent and likely to continue because of the numbers of large buildings available on old IDA industrial estates.

"Finding occupiers for that level of space is not easy," according to Begley. Demand for Citywest is "still pretty good" but people "are not keen to sign long leases".

The CB Richard Ellis overview of the Dublin industrial market for the third quarter of 2008 also says that there has been a downturn in the second half of the year.

Garrett McClean of CB Richard Ellis says only 43,548sq m (468,746sq ft) of accommodation was let or sold in a three-month period as compared to the 70,000sq m (753,473sq ft) that was sold over the same period in 2007.

Letting transactions account for the majority of deals signed by CB Richard Ellis, with most of those in Dublin south-west (33 per cent) and Dublin north-west (27 per cent).

CB Richard Ellis says that, despite the stamp duty reduction from nine to 6 per cent announced in the Budget and even despite the reduction in fuel prices, "resurgence in activity is expected to be minimal until lending facilities improve".