27
February
2013
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00:00
Europe/Dublin

Busy first two months in the Irish commercial property sector

Dublin, 1st March 2013 - Commercial property consultants CBRE today released their first bi-monthly report of 2013, focussing on current trends in all sectors of the Irish commercial property market. The property consultants report strong demand in all sectors of the Irish commercial property market during the first two months of 2013 with increased volumes of transactional activity being experienced across the country. CBRE have increased their prime rent series for office properties in Dublin and have also adjusted their prime yield series for some sectors due to the weight of international money chasing prime investment opportunities. CBRE also report some improvement in the availability of bank funding over recent months.

Occupier Market

  • 2013 started well in the office occupier market with a steady volume of office letting activity concluded during January and February, a number of notable transactions being negotiated at present and some new requirements emerging
  • CBRE has increased their prime city centre office headline rent series for the first time in six years to €306.66 per square metre or €28.50 per square foot and expect they will be revising this upwards again over the coming months as competition for the best office buildings increases
  • Although conditions in the retail sector remain difficult and many retailers continue to struggle with rent and rates obligations, there is an evident improvement in activity in the retail property sector with several bidders on many of the well-located properties that are being brought to market at present
  • The effect of polarisation is very evident in the retail sector with a scarcity of suitable stores in some locations to suit occupier’s specific requirements and significant oversupply in other locations around the country where demand is considerably thinner
  • Much of the industrial leasing activity being completed at present comprises relatively small lot sizes although there are a number of larger requirements outstanding and there is an emerging scarcity of quality modern logistics stock larger than 4,645m2 along certain corridors


Investment Market
  • Much of the focus in the Irish investment market in the first two months of this year has been on preparing assets for sale and completing the sale of assets that were brought to the market late last year, with very little new product having been released for sale during January and February
  • Irish investors sold over €2.4 billion of property investments in the UK in 2012 in 62 transactions and CBRE expect to continue to see Irish owned assets in the UK being offered for sale over the course of 2013
  • Much of the focus in recent weeks has been on loan portfolios, fuelled to some extent by NAMA’s decision to bring two Irish loan portfolios to the market and the likliehood of other loan portfolios coming to the market following the liquidation of the Irish Banking Resolution Corporation (IBRC) last month. While there is undoubtedly very strong demand for Irish loan portfolios, there is a cohort of investors, particularly institutional investors, who have a preference for direct investment and will continue to focus their attention on purchasing prime property assets as they are released to the market
  • Some international investors are now moving up the risk curve in order to secure product
  • The weight of money chasing prime investment opportunities in the Irish market is impacting postively on yields to the extent that CBRE has adjusted their prime yield series this month by 25 basis points for prime offices, prime retail high street and prime shopping centres and upgraded their short-term outlook for yields in several sectors

Development Market

  • In the Dublin market, small new homes developments have commenced in locations including Carrickmines, Maynooth, Dun Laoghaire, Saggart, Rathgar and Knocklyon while a number of new planning applications for housing developments have been lodged. On the back of this gradual improvement, there has been an increase in the volume of enquiries for development sites, with encouraging volumes of demand emanating for well-located strategic sites that are priced appropriately
  • Despite the extent of dezoning that has occurred around the country, the vast majority of provincial sites that are selling are trading at agricultural values. The sale of agricultural land continues at a brisk pace around the country, fuelled to a large extent by cash purchasers. There has been a notable increase in the volume of agricultural land sales being conducted by auction over the last few months
  • CBRE expect to see an increasing number of vendors bringing sites to the market over the coming months to capitalise on the current strength of demand for well-priced strategic sites in core locations, particularly in Dublin city centre
Hotels & Licensed Market
  • Hotel transaction numbers were well up in 2012 with 24 properties sold in Ireland last year compared to only 8 transactions in 2011. These 24 sales accounted for a total spend of €146 million between them. This momentum has continued into 2013 with several hotel sales agreed during the first two months of the year and a number of transactions currently in negotiations or in legals
  • Following the sale of 12 Dublin pubs last year, there has been a noticeable increase in the volume of pubs going into receivership and being offered for sale in the first two months of 2013
  • Demand for well-located Dublin pubs is encouragingly strong with several bidders on many properties and many assets achieving higher than the asking price. Although most purchasers are cash buyers, there has been some improvement in the availability of funding for licensed premises over recent months

Northern Ireland
  • The process of develeveraging has gathered pace in the Northern Ireland property market over recent months with a notable increase in the volume of assets being prepared for sale and coming to the market across the region. A number of investment assets are due to come to the market over the coming months. Demand remains firmly focussed on prime investment opportunities in Belfast with a discernible gap between prime and secondary yields continuing to emerge
  • There is no doubt that recent civil unrest and resultant negative press coverage has had an impact on occupier decision-making in the Northern Ireland property market. Indeed, it is believed that a number of potential leasing transactions in Belfast have been put on hold as a direct result, which is clearly disappointing

According to Marie Hunt, Executive Director and Head of Research at CBRE “Following on from the momentum in the second half of 2012, there has been an encouraging volume of activity in all sectors of the Irish commercial property market since the beginning of 2013. There is a steady volume of activity in all of the occupier markets and very strong demand from investors for prime Irish real estate, to the extent that yields for prime properties have now started to show signs of improvement. The recent liquidation of IBRC will undoubtedly escalate the pace and volume of deleveraging which was occurring anyway in the Irish market. Improving economic conditions coupled with attractive pricing and medium term rental growth prospects mean that investor demand is firmly focussed on good investment opportunities in the Irish market and we expect to see continued volumes of transactional activity both in the form of asset disposals and loan portfolio sales over the coming months”.

ENDS

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 or




CBRE | Bi-Monthly Research Report - March 2013