Busy autumn selling season in prospect in the Irish commercial property market.
RESUMPTION IN ACTIVITY ANTICIPATED FOLLOWING QUIET JULY AND AUGUST.
PRIME RENTS AND VALUES NOW STABLE.
Dublin, August 31st 2012 – Property consultants CBRE today released their September 2012 bi-monthly report commenting comprehensively on the latest trends and transactions in the occupier and investment sectors of the commercial property market in the Republic and in Northern Ireland.
According to the report, the months of July and August were quiet in the Irish commercial property sector but that a busy Autumn selling season is now in prospect with a number of new properties expected to be formally offered for sale over the coming weeks. According to Marie Hunt, Executive Director and Head of Research at CBRE “Following a relatively busy first half to the year in terms of transactional activity, the commercial property sector experienced its traditional Summer lull this year with very little activity occurring in any sector of the market during the months of July and August. However, there was considerable pitching activity underway all Summer suggesting that a significant number of new properties are to be launched for sale over the coming weeks with a busy Autumn season now in prospect”.
According to CBRE, prime rents and yields in the commercial property sector are now stable.
HOTELS & LICENSED MARKET
There was some improvement in market activity in the Irish hotel sector during the first half of 2012 and this momentum seems to be building with an increasing number of hotels now being brought to the market, mainly on the instructions of receivers and the non-NAMA banks. The Autumn season has kicked off with the news that Dublin’s largest hotel - the 501 bed Burlington Hotel in Dublin 4 has just come to the market, guiding between €65 and €75 million.
Despite poor weather during the Summer, there has been a significant increase in visitor numbers to Ireland year-on-year with Dublin being the main beneficiary. According to the latest data from STR, there has been a continuing improvement in the Dublin hotel market’s trading performance in each of the last 23 months.
Several of Dublin city centre’s better known pubs are currently undergoing refurbishment which is a good omen for the future for a sector that has struggled for some years.
There are now firm signs of prime property values reaching a floor with prime rents and yields showing evidence of stabilisation. However, further slippage in rents and yields for secondary assets continue to impact performance numbers on an aggregate basis. Therefore, while according to the Investment Property Databank (IPD), total returns in the Irish investment market in the first half of 2012 were positive at 1.7%, capital values continued to decline in the period, albeit not as aggressively as in previous quarters. Average values are now down 66% from peak.
Just under €140 million was invested in the Irish investment market during the first half of the year in 12 individual transactions. 8 of 12 investment transactions signed in H1 were to local buyers but overseas buyers accounted for 76% of spend in the period.
Although UK property values are under pressure, to some extent sovereign debt problems in the Eurozone have strengthened demand for London, with investors perceiving the city as a safe haven counterbalancing their Euro holdings. Irish investors have continued to sell UK assets over recent months, with 22 Irish investment sales totalling £545 million completed in the UK in the first half of 2012 alone.
Office demand across most European capitals including Dublin continues to be constrained by Eurozone uncertainty with many potential occupiers hesitant to pursue expansion and location decisions in the immediate term. There are a number of outstanding requirements for office accommodation in Dublin which remain active and which will translate into lettings in due course. However, considering the length of time it is taking to conclude negotiations in the current climate, getting these transactions completed by year-end will prove challenging.
An increasing number of retailers are now reporting stable performance and in some cases year-on-year improvements in trade and turnover.
Discount retailers remain expansionary with several new stores opening and in the pipeline around the country.
Much of the activity in the industrial sector of the property market continues to comprise opportunistic relocations and expansions. There is considerable lease restructuring being undertaken and a number of industrial occupiers are exploring the possibility of purchasing the buildings they occupy to take advantage of current pricing. A good example was the recent purchase by the pharmaceutical company United Drug of its HQ building at Magna Park in Citywest for €29.9 million.
It is encouraging that new property requirements continue to materialise from overseas occupiers in a range of sectors such as distribution and pharmaceuticals. These occupiers are undoubtedly attracted by the relative affordability of occupation costs in Ireland although the 12.5% corporate tax rate remains the single most important attraction for many of these companies.
DEVELOPMENT LAND MARKET
A number of sites will be formally launched for sale during the Autumn selling season as banks, receivers and borrowers continue to bring land parcels to the market.
Most of the activity in this sector comprises agricultural land sales with land trading all around the country, achieving prices of between €6,000 and €12,000 per acre in most instances.
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 firm (in terms of 2011 revenue). The Company has approximately 34,000 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.