Commercial Real Estate Market Enters The Final Straight Of What Has Been An Exceptionally Busy Year
Dublin, 1st November 2015 – Commercial property consultants CBRE Ireland today released their final bi-monthly report for 2015 focussing on trends and transactions in each sector of the Irish commercial property market in a year that the property consultan
Click here to download the full report: CBRE | Bi-Monthly Research Report November 2015
Scroll down to view Head of Research, Marie Hunt's November Bi-Monthly Video Commentary
According to the author of the report, Marie Hunt, Executive Director and Head of Research at CBRE Ireland,
“2015 has been an exceptionally busy one in the Irish commercial real estate market from both an occupier and investor viewpoint. A combination of continued deleveraging from NAMA and various banks combined with secondary trading by the entities that purchased assets and portfolios in recent years has seen increased volumes of transactional activity occurring in all sectors. This continued throughout the Autumn with several notable assets having recently been launched for sale. As domestic economic conditions continued to improve over the course of the year, this has boosted the attractiveness of commercial real estate investments in the Irish market and led to a recovery in pricing being experienced across the board. The focus for the next two months of 2015 will be to get transactions across the line before year-end and bring what has been an exceptionally busy year in the Irish commercial real estate market to a close”.
- The most recent performance data for the Irish commercial property market produced by MSCI shows that a total return of 6.1% was achieved from Irish real estate in Q3 2015 with annualised returns of 28.4% being achieved to the end of the third quarter of the year.
- Investment spend is likely to be in the order of €3 billion for 2015, which is down year-on-year but excludes a number of large assets which are counted separately by virtue of having been traded as loan sales as opposed to asset sales.
- Demand for multifamily residential opportunities has been thinner of late, primarily as a result of continued uncertainty around anticipated Government intervention in the Irish housing market.
- Demand for lot sizes of less than €20 million is also thinner than at the upper end of the market due to difficulties in securing funding for smaller lot sizes.
- A greater pricing differential between prime and secondary assets is now starting to emerge.
- Annual average volumes of take-up in the Dublin office market were exceeded by the end of the third quarter of 2015 and year-end take-up is now firmly on target to beat last year.
- With the supply of existing buildings continuing to decline and the overall rate of vacancy having gone into single digits for the first time in more than 15 years in Q3, an increasing number of occupiers are signing pre-lettings in many of the schemes that are currently under construction or in various stages of the planning process.
- In total, there is currently demand for over 250,000m2 of accommodation, comprising small to medium-sized requirements in the main. An increasing proportion of occupiers are now willing to consider locating outside of the traditional CBD where there is some availability of stock and rents are more affordable. Occupiers currently looking for accommodation in the Dublin market include Slack, Pivotal and SAS Business Analytics.
- Prime rents in Dublin city centre remain steady at approximately €565 per square metre (€52.50 per square foot) but remain on target to reach €592 per m2 (€55 per sq. ft.) by year-end.
- A very busy Christmas trading season is now in prospect, helped to some degree by cuts to the Universal Social Charge (USC) in the recent Budget, which will boost personal disposable income and in turn improve retail sales activity in the economy.
- Further upward movement in rental values on both Henry Street and Grafton Street is expected before year-end with rental growth filtering down to provincial schemes over the course of the next 12 months as the recovery in Irish retail sales continues.
- Retailers main focus for the next couple of months will be firmly on capitalising on what is likely to be one of the busiest Christmas trading periods in several years.
INDUSTRIAL & LOGISTICS
- Following bumper take-up of more than 310,000m2 being achieved in the Dublin industrial market in the first nine months of the year, a number of other transactions are expected to close before year-end. Most of these transactions are small-to-medium sized sales and lettings, as opposed to some of the larger transactions in excess of 10,000 square metres which completed in this sector earlier this year.
- The industrial sector is now slowly moving into the development phase of the cycle with a number of planning permissions having been lodged over recent months.
- Prime industrial rents remain stable at approximately €72.50 per square metre but are set to reach €75 per square metre by year-end and are likely to continue rising in 2016. Meanwhile, prime industrial investment yields have contracted in recent months and currently stand at 6.25%.
HOTELS & LICENSED
- Activity has continued in the hotel sector of the Irish property market over the last few months following the completion of a record 54 hotel sales totalling almost €650 million in the first nine months of 2015.
- A combination of domestic and international buyers buoyed by domestic economic conditions and improving hotel performance figures, continue to focus on hotel investment opportunities throughout the country.
- An increasing number of refurbishment and extension programmes are being planned in the Irish hotel sector with a notable shift towards new hotel development in the Dublin market.
- Following what was a bumper year for Irish tourism and in turn the Irish hotel sector, hoteliers are now gearing up for what promises to be a very good Christmas trading period, helped to some degree by the retention of the 9% VAT rate in the recent Budget.
- Only 2,057 new houses were developed in Dublin in the first nine months of 2015 according to the Department of the Environment (DOE) despite there being prevailing demand for multiples of this level of housing provision in the capital. Only 8,914 houses were developed in the entire country in the period, with almost half of these comprising one-off dwellings. The lack of detail in last months Budget on Government plans to stimulate much-needed housing construction was therefore most disappointing.
- There has been continued activity in the development sector of the market over the course of the Autumn with several land transactions having been completed in recent months and others due to close by year-end. CBRE are anticipating a similar volume of trades to last year with transactions for the most part being relatively small in size. One of the outcomes of the Central Bank’s mortgage affordability rules which came into effect earlier this year is increased demand for land in the commuter belt of Dublin.
- CBRE are urging landlowners and those controlling land within various loan books and portfolios to bring more land to the market to faciliate the development that needs to take place to address the severe housing shortages prevailing in the economy.
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 (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. 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 165 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, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.