2013 on track to be the best year since 2007 for the Irish commercial real estate market

Dublin, 1st November 2013 – Commercial property consultants CBRE today released their last bi-monthly report for 2013, focussing on trends in all sectors of the Irish commercial property market. The property consultants say that 2013 is on track to be the best year in the Irish commercial property market since the peak in 2007 with transactional activity in all sectors up significantly year-on-year.

According to Enda Luddy, Managing Director at CBRE Ireland, “2013 has been a very strong year for the Irish commercial property market with recovery now evident in each sector of the market and a marked improvement in transaction volumes across all sectors. At this stage in the year the focus would normally be on getting transactions closed by year-end but such is the weight of demand for prime real estate at present, we are continuing to see new properties and portfolios being released for sale even at this late stage in the year”.

Office & Industrial Market

  • Several large office lettings have recently been agreed which will boost Q4 take-up in Dublin considerably
  • In response to evidence of a shrinking supply of Grade A office accommodation in Dublin 2/4, there has been an increase in the number of planning applications being prepared and lodged. With demolition due to get underway on a well-located second generation office building on St. Stephen’s Green and several planning applications recently lodged, it remains to be seen which scheme will kick-start the next phase of office development in Dublin in 2014
  • Prime headline office rents in Dublin are now in the order of €350 per square metre and are expected to reach €377 per square metre by year-end with a further 15% uplift in headline rents likely to occur in prime locations during 2014
  • There is a scarcity of large modern industrial facilities in many locations which will ultimately put upward pressure on rental values. However, there is no evidence yet of prime industrial rents rising beyond their current level of approximately €60 per square metre although inducements such as rent-free periods are starting to reduce in this sector
  • The long-promised Commercial Lease Database has now been formally launched. While improved transparency is to be broadly welcomed, it remains to be seen how meaningful this database will be, in its initial stages at least

Retail Market
  • Many retailers are now gearing up for what promises to a busy Christmas trading period
  • In the retail property market, activity is primarily focused on the better performing shopping centres and high streets with Dublin witnessing a greater volume of transactional activity than other locations. Many of the units previously vacated by other retailers are being re-let to new occupiers
  • In one of the largest retail lettings signed in the capital this year, TK Maxx have agreed to lease 3,118m2 at the ILAC Centre in Dublin 1
  • Retail landlords are concerned about the imminent adoption of fast-track legislation which will enable small businesses to pursue an examinership process though the Circuit Court

Invetsment Market

  • The most notable trend in the Irish investment market during the last two months has been the increase in the volume of properties coming available for sale. As we approach year-end we continue to see new properties being launched for sale which is unusual on the basis that new sales campaigns are rarely launched during November and December
  • Having achieved total spend of €1.065 billion in the first nine months of 2013, the likelihood is that total spend in 2013 will now exceed €1.5 billion – almost three times higher than the volume of spend in the Irish investment market in 2012
  • Prime office yields in Dublin are now in the order of 6.0% while prime high street retail yield are approximately 5.5%

Development Market
  • 55 non-agricultural land sales were completed in the Irish market in the first nine months of 2013 which is higher than the number of sales achieved during the peak year of 2007. This would undoubtedly be considerably higher if more land was released for sale with more buyers than sellers for prime sites at present. There is a particular scarcity of large land banks being released for sale
  • Demand for sites is being primarily fuelled by the imbalance between supply and demand in the Dublin housing market and signs of rental growth in the Dublin office sector
  • While there were some welcome measures which will go some way towards stimulating the construction sector contained in the recent Budget, the Government missed an opportunity to remove the onerous 80% windfall tax on land rezoning which is proving a serious impediment to development in the market
  • While sites with planning permission are trading, in many cases the existing planning is unrealistic based on current end user requirements which is predominantly for low density housing units as opposed to high density apartment developments. As developers liaise with planning authorities with a view to amending existing planning applications, the ability to get on site and start providing much-needed housing is compromised although some developers are starting to develop houses and simultaneously consulting with planners about revising other elements of proposed schemes
  • Considering the strength of the residential rental market in Dublin, some developers are now focussing on creating product for professional multi-family residential investors. However, this will only materialise in prime locations with strong rental prospects

Hotels & Licensed Market
  • The number of visitors to Ireland was up 7.8% between July and September having increased by 7.6% in the previous quarter. Against this backdrop, there has been considerable activity in the hotel and licensed property market
  • 20 hotel properties totalling €106 million sold in Ireland during the first nine months of 2013 and at this stage the total number of hotel transactions in 2013 is expected to exceed last year’s total of 24 sales

Northern Ireland Market

  • The second half of 2013 has been considerably busier than the first half in the Northern Ireland property market, with an increase in the volume of properties being released for sale over recent months. A number of significant investment properties have sold recently including a Tesco Extra store in Newry, which sold for £30.3 million, reflecting a net initial yield of 4.95%. Most of the demand for institutional grade investment properties of this nature is emanating from UK investors who are increasingly looking for opportunities in regional markets such as Belfast
  • With the annual Christmas market at City Hall and an ice-rink planned for Custom House Square, it is hoped that political tensions can be kept at bay and that flag protests planned over the coming weeks won’t deter from what promises to be a busy Christmas trading period across the region


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CBRE | Ireland Bi-Monthly Research Report November 2013
CBRE | Ireland Bi-Monthly Research Report November 2013