Buoyant Activity In All Sectors Of The Irish Commercial Property Market In The 1st 2 Months Of 2014

Dublin, 1st March 2014 – Commercial property consultants CBRE today released their first bi-monthly report for 2014, focussing on trends in all sectors of the Irish commercial property market. As predicted in their Outlook 2014 report at the beginning of the year, the property consultants report buoyant activity in all sectors of the Irish commercial property market since the beginning of 2014, fuelled to a large extent by a carryover of property transactions from last year with several large portfolios of assets and loans being released for sale towards the end of 2013 and being traded during January and February.

According to Marie Hunt, Executive Director and Head of Research at CBRE Ireland, “It is fair to say we have experienced the busiest January and February in the Irish commercial property market in many years. In addition to a number of new assets being released for sale since the beginning of the year, there was a significant carryover of transactional activity from last year in many sectors. Demand in the investment sector continues at pace with no let-up in demand from domestic and international investors for the various assets and loan portfolios being released to the market for sale. A number of investors appear to be getting more confident about opportunities outside of the core Dublin market on the basis that the clear recovery experienced in the prime market is now starting to filter out somewhat. Encouragingly, activity in all of the occupier markets is also strong with improving economic prospects boosting sentiment over recent months”.

-The first two months of 2014 have been extremely busy in the investment sector with a significant carryover of transactions from last year and several new properties and loans being offered for sale during January and February.
-There is now an expectation that the number and value of loan and asset disposals will increase significantly over the coming months as NAMA and various financial institutions such as Ulster Bank (who recently appointed Eastdil to dispose of €1 billion of their Irish assets) accelerate their deleveraging activities to match current demand levels.
-CBRE expect to see an increase in the number of retail properties being traded over the coming months, particularly as some of the large loan sales currently on the market such as Project Drive include considerable retail assets.
-In addition to the plethora of international funds, loan buyers, Irish REIT vehicles and domestic funds vying for investment opportunities in the Irish commercial real estate market at present, new investors from a range of jurisdictions continue to emerge, buoyed by signs of economic recovery in Ireland.
-A number of investors appear to be getting more confident about opportunities outside of the core Dublin market on the basis that the clear recovery experienced in the prime market is now starting to filter out somewhat.
-Prime office yields in Dublin are now in the order of 5.25%; prime retail yields are 5.25% also while prime industrial yields are in the order of 8.0% according to CBRE.

-Fuelled by improving occupier markets and an imbalance between supply and demand in the Dublin housing market, there has been considerable momentum in the development land sector during the first two months of 2014, following the completion of 75 development land sales totalling almost €200 million last year.
-Although in many instances, development is once again feasible now that rental and capital values have started to increase, development funding remains difficult to source. In any event, development cannot proceed in Dublin Docklands until the Strategic Development Zone (SDZ) has been formally adopted. Opportunities that offer short-term income and medium-term development prospects are particularly highly-sought-after at present.

-The Irish Government are proposing a series of measures to stimulate much-needed residential development including reviewing Part V requirements in relation to the provision of social and affordable housing and potentially reducing development levies in certain instances. However, in addition to the positive measures proposed to remove obstacles to development, the Government are also considering the introduction of a vacant land levy, which if not implemented carefully could actually have the opposite effect than the one intended according to CBRE.

-As in other sectors of the Irish property market, there has been a significant carryover of transactions from last year in the hotel sector with several hotel sales agreed in the first two months of 2014. Demand for prime properties remains robust and while some new hotels have been brought to the market during the first few months of 2014, there are clearly not enough Dublin properties available to satisfy the volume of demand from international investors. We expect the process of deleveraging to pick up pace considerably over the coming months with several well-known hotels due to come available for sale, albeit, with the exception of the investment sale of the 5 star Westin Hotel in Dublin city centre, most of these hotels are outside of Dublin.
-With considerable focus on getting 2013 transactions completed, there has been somewhat of a slowdown in terms of new licensed properties coming to the market in the first two months of 2014, but we expect an increase in transactional activity in the pub sector over the coming months as the next tranche of receiver sales are launched for sale.

-Having achieved strong take-up of almost 171,000m2 in 184 individual transactions in 2013, the first two months of 2014 have proved equally strong in the Dublin office market with a number of transactions being agreed since the beginning of the year and a notable increase in the volume of enquiries over recent months.
-The largest transactions completed since Christmas include the letting of 6,500m2 to Amazon at Burlington Plaza, Dublin 4 and the letting of 5,110m2 to Dropbox at Park Place in Dublin 2.
-A rapid improvement in rental values in Dublin’s Central Business District is encouraging the first phase of new office development in the capital with new office schemes now on site at Canada House on St. Stephens Green, Dublin 2 and at the former Vet College site in Ballsbridge, Dublin 4.
-Development of new office buildings in the highly-sought after Docklands region cannot commence however until such time as the Strategic Development Zone (SDZ) for the region is formally adopted later this year. Until such time as new buildings are ready for occupation, the scarcity of Grade A office accommodation will become more acute which in turn will continue to drive rental growth in prime locations.
-As prime headline rents approach €430 per square metre (€40 per sq. ft.) over the coming months, this will force some companies, particularly those in the IT sector, to consider locating outside of the Central Business District, which will in turn boost demand for suburban offices.
-With the balance of power increasingly moving towards landlords and rents increasing, some office tenants are now willing to compromise on building specification in an effort to secure premises in their preferred location.

-Although CBRE expect to see prime industrial rents increasing during 2014, they remained stable at approximately €60 per square metre during the first two months of the year.

-Many retailers around the country have been reporting an improvement in consumer sentiment and trading volumes since the beginning of the year on the back of improving economic prospects. In the property sector, this has manifested itself in an increase in the volume of retail transactions being agreed over recent months although many of these transactions are taking some time to complete.
-Retailer demand is strengthening, particularly in Dublin, although CBRE say they have also witnessed an improvement in demand for provincial properties over recent months.

-News that the National Asset Management Agency (NAMA) have appointed Lazard on the sale of its entire Northern Ireland property portfolio, following an approach by a potential investor, is set to dominate the headlines over the coming weeks considering the potential impact a large-scale sale would have for the market.
-There have been clear signs of positivity emerging in the retail sector over recent months. We have seen a marked increase in the number of enquiries from both local and multiple UK retailers since the beginning of the year with a number of transactions now in legals and due to sign over the coming weeks. These include lettings to some new entrants to Northern Ireland.
-The recently released LPS Land Comparable study showed that over £38.35 million of land sales transacted in Northern Ireland last year of which 65% or £25 million comprised residential sites. Over the coming months, attention will undoubtedly be on the entities that have considerable deleveraging to do in Northern Ireland and the pace at which they might bring assets or loans to the market with NAMA’s Project Eagle certain to be the main focus.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 130 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie./ni

CONTACT: Marie Hunt – 00 353 1 6185543 / 00 353 87 2727115 or e-mail:marie.hunt@cbre.com

CBRE Ireland Bi-Monthly Research Report March 2014