31
August
2013
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00:00
Europe/Dublin

Busy autumn in prospect in the Irish commercial real estate market

Dublin, 1st September 2013 – Commercial property consultants CBRE today released their latest bi-monthly report, focussing on trends in all sectors of the Irish commercial property market. The property consultants say a very busy Autumn season is in prospect in the Irish commercial property market following a very strong first half to the year and a busy Summer season when the pricing of prime real estate continued to show signs of improvement.

Please see link further below to download a pdf copy of the full report

According to Marie Hunt, Executive Director, CBRE Ireland “We continue to see prime real estate improving in value as yields in almost all sectors of the market contract in response to the weight of capital chasing investment opportunities and expectations of future rental and capital appreciation. The establishment of two new Irish REIT vehicles and the expectation that others will emerge in due course is enabling new investors with a preference for indirect exposure to the Irish real estate recovery to emerge. In response to strong demand, particularly from international investors, several large portfolios of assets have recently been launched for sale and several others are due to be released over the coming weeks. Similarly a number of high-profile hotels and pubs are due to be released for sale over the coming months. The ending of the capital gains tax waiver at the end of this year will undoubtedly put pressure on many vendors and purchasers to get property transactions completed by year-end”.

OFFICE & INDUSTRIAL MARKET

  • As the scarcity of Grade A office accommodation in the Central Business District continues to be eroded, we are beginning to see some developers entering pre-planning discussions and in some cases lodging planning permission for new buildings. However, construction will not commence until such time as rental values improve further or a significant pre-letting has been agreed
  • Considering the number of secondary office buildings in prime locations, the Irish Government should consider introducing a scheme akin to the Business Premises Renovation Allowance (BPRA) that prevails in the UK in the forthcoming Budget to encourage the refurbishment of existing office stock and alleviate the shortage of prime accommodation in core locations
  • Prime office rents in Dublin 2/4 are expected to increase further over the coming months
  • Although prime industrial rents are currently stable at approximately €60 per square metre, continued transactional activity in this sector is leading to net absorption of prime accommodation which will inevitably lead to rental increases for prime stock in due course
  • The release of the long-promised Commercial Lease Database is now reportedly imminent. 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

  • Activity in the retail property market over recent months has been brisk with considerable leasing and sales activity occurring, particularly in the Dublin market, with many retailers now finding it difficult to secure stores in their preferred locations
  • The issue of rates continues to frustrate retailers around the country and is particularly pertinent to retailers in locations where revaluations are currently taking place, including Dublin city centre and Waterford city centre. These assessments are due to take effect from the 1st of January next year. Unless retailers successfully appeal these rates assessments, significantly higher rates will be payable from next year in many cases
  • It remains to be seen what impact, if any, bringing Budget 2014 forward to mid-October this year will have on the retail sector. Many retailers believe that it will lead to a stronger Autumn season with consumers having certainty about likely changes in their personal financial circumstances earlier in the year

  • DEVELOPMENT MARKET
    • The number of development land transactions signed over recent months is not reflective of the volume of activity underway due to the long time it is taking to complete transactions in this particular sector. There are a large number of land deals agreed, both on and off-market and in various stages of closing at the moment, fuelled to some extent by signs of recovery at the prime end of the housing and office markets respectively
    • Recent proposals by the Labour Party proposing imposing a tax on all ‘vacant’ or ‘undeveloped’ zoned sites in the forthcoming Budget (which stemmed from proposals first mooted by the Lord Mayor of Dublin) are very worrying. Introducing such a tax at a point in the cycle when development is not financially feasible and development funding is scarce will do nothing to meet the stated objectives of stimulating development or encouraging regeneration. In fact, this proposal has the potential to do the opposite and damage the beginnings of the market-led recovery that is slowly starting to emerge

    HOTELS & LICENSED MARKET
    • Demonstrating the strength of demand in the Dublin market, four new budget hotel projects are in the planning system in the capital
    • A very busy Autumn is now in prospect with some very attractive good quality hotel properties coming available for sale around the country. For many of these properties, there will be considerable pressure to get transactions closed by the year-end to avail of the Capital Gains Tax waiver that expires at the end of 2013
    • Now that this sector appears to be stabilising and showing signs of improvement it is imperative that the Government retain the temporary 9% VAT rate for hotel accommodation and restaurant meals in the forthcoming Budget

    NORTHERN IRELAND MARKET

    • There has been an improvement in transactional activity in the investment sector over recent months. There is some depth to the market at the moment with considerable money chasing prime investment opportunities and a resumption of bank funding for prime assets. Yields in many sectors have contracted over recent months in reaction to strong demand for prime product in the region with UK institutions and local buyers active and particularly strong demand for shopping centres, out-of-town retail and office properties
    • Following considerable stagnation, the process of deleveraging appears to have kicked off in earnest over recent months with a notable increase in the volume of investment product being released for sale across Northern Ireland. While NAMA and the banks are beginning to release properties for sale in the region, a number of sales are also coming from consensual borrowers. Demand for property investments is being driven by pricing that is below replacement cost in many cases and the comparative gap between property yields and interest rates


    Ends

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

    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 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 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 110 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



    Ireland Bi-Monthly Research Report September 2013
    Ireland Bi-Monthly Research Report September 2013


    Published on: 01 09 2013