Even Busier Year In Prospect For The Irish Commercial Property Market In 2014
Technological Change and Globalisation will shape the next real estate cycle
Please see link at end for a pdf copy of the CBRE | Outlook 2014 report.
Dublin, 14th January 2014 – Commercial property consultants CBRE today released their Outlook 2014 annual report containing their final year figures for transactional activity in different sectors of the Irish commercial property market in 2013 and their predictions for each sector in the year ahead. The property consultants say that 2013 was a stepping stone to the next cycle in the Irish commercial property market and that 2014 is on track to be even busier than last year with strong volumes of activity anticipated in each sector of the property market over the next 12 months.
Speaking at the launch of the 25th edition of their annual Outlook report at the RDS, this morning, Enda Luddy, Managing Director at CBRE Ireland said, “2013 marked a major turning point for the Irish economy and in turn, the property market. Transactional activity in all sectors of the market was up year-on-year. Although there are several legacy issues still to be tackled and our economy remains susceptible to macroeconomic developments, 2014 is shaping up to be an even busier year for the Irish commercial property market than last year, fuelled to a large extent by improving domestic economic indicators and by some improvement in the availability of debt funding”.
Key Statistics for 2013
-33 hotel sales concluded in Ireland in 2013, totalling almost €160 million, compared to 24 hotel sales totalling €146 million in 2012.
-96 investment transactions of greater than €1 million concluded in the Irish market during 2013, totalling €1.78 billion, compared to 35 transactions totalling €545 million in 2012. Over 50% of the 2013 investment activity emanated from overseas investors. When loan sales are added, the total volume of activity in the Irish investment market in 2013 was more than €2.5 billion.
-Office take-up of 170,600m2 was achieved in Dublin in 2013, compared with 136,328m2 of office take-up in 2012 demonstrating an improvement in foreign direct investment and domestic corporate expansion during the last 12 months.
-The overall vacancy rate in the Dublin office market decreased from 18.96% at the beginning of 2013 to 15.33% by year-end with more significant declines in vacancy rates being experienced in specific districts, particularly in the city centre and south suburbs.
Industrial & Logistics
-Industrial take-up of 296,340m2 was achieved in Dublin in 2013, compared with 200,548m2 of take-up in this sector in 2012.
-75 sales of non-agricultural land were agreed in 2013 totalling almost €200 million compared to 56 sales totalling €49 million in 2012.
CBRE Ireland’s Key Predictions for 2014
-2014 will see the return of the crane to the Dublin landscape as the next wave of office development in the capital commences.
-Prime office rents in Dublin 2/4 are set to increase by a further 15% during 2014 to reach approximately €435 per square metre or €40 per square foot by year-end having increased by more than 25% during 2013.
-In addition to some new development an increase in the number of office refurbishment and retrofitting projects is expected this year.
-Stronger volumes of activity are expected in the Irish retail property market over the course of the next 12 months.
-In addition to existing retailers expanding and relocating, several new retailers are expected to make their Irish debut this year as international retailers increasingly focus attention on Ireland.
-While prime high streets and major shopping centres accounted for the greatest proportion of activity in the retail property market last year, this momentum is expected to filter down to secondary streets and provincial locations to some degree during 2014.
-Some rental growth expected to re-emerge in the Irish retail market for the first time in more than six years during 2014, albeit limited to certain prime high streets and shopping centres for the foreseeable future.
-Following several years of no new development, this year will see some selective retail development coming on stream around the country, primarily in the form of additional phases in existing schemes.
-There is a likelihood of matching, if not exceeding, the record level of transactional activity that occurred in the Dublin industrial and logistics sector in 2013 over the course of the next 12 months considering the volume of demand to purchase and rent prime buildings in this sector.
-Now that we are entering a phase of stronger economic growth, some property investors are expected to selectively move up the risk curve from core real estate to secondary properties in an effort to boost returns.
-An increasing number of global investors who lack local market knowledge and don’t have the management resources to manage Irish assets directly will look for alternatives to direct sole ownership such as partnerships and joint ventures as well as indirect investment through REIT’s and property funds.
-Following the establishment of two Irish REIT’s last year, other Irish REIT vehicles are expected to emerge in 2014 although the Irish market is too small to sustain a large number. In addition to new REIT vehicles being established, 2014 could see some existing Irish entities converting to REIT structures and the existing Irish REIT’s undertaking additional rounds of fundraising.
-Some significant land parcels are likely to be offered for sale during 2014, some of which will form part of larger mixed-used portfolios. Some land that originally formed part of loan sales during 2012 and 2013 are expected to be offered for sale this year.
-2014 will see a notable increase in the volume of house building in the Dublin market, albeit from a very low base. This in turn will boost demand for small residential zoned sites, particularly those with planning for between 50 and 100 housing units. There is also likely to be strong demand for office sites in the capital.
-Although the majority of land sales over the last 12 months have been acquired by cash purchasers, there will now be pressure on banks to provide development finance to support the beginning of the next development cycle. Demand from private equity houses to fund or partner with local developers on development projects will increase.
-Outside of Dublin, a significant amount of provincial land will be traded in 2014 although buyers are likely to comprise local purchasers in the main. Only lands that are appropriately priced will attract buyers however with little or no premium payable for the benefit of zoning or planning permission.
-A number of Dublin city centre hotel properties are likely to be offered for sale during 2014 as well as some good quality provincial hotels. Demand in this sector will continue to be dominated by overseas purchasers. Many of the buyers that purchased Irish hotel properties over the last number of years are likely to transact again in order to increase their exposure to the Irish market while a number of new entrants from jurisdictions that have not yet invested in Ireland are expected to emerge.
According to Marie Hunt, Executive Director and Head of Research at CBRE Ireland, “Technological change and globalisation are the two trends that will dominate the next real estate cycle, affecting each sector of the market in a variety of different ways. Technological change is shaping the office sector as trends such as remote working and hot-desking gather momentum and occupiers use buildings in a different way. It is affecting the retail sector with an increasing proportion of retailing being done online, which in turn is fuelling demand for more modern logistics and distribution facilities. Trends such as an increase in 3D printing and drone delivery of goods will have implications for the real estate sector. Technology is also shaping the way properties are traded with the sale of an increasing proportion of assets now being conducted via data rooms. Just as investors, occupiers and developers have had to adjust in the 25 years since our first Outlook report was written, it is now vital for owners, occupiers and investors to keep abreast of emerging trends to pre-empt how real estate will be planned, designed, developed, occupied, owned and managed over the coming years and decades“
CONTACT: Marie Hunt – 00 353 1 6185543 / 00 353 87 2727115 or e-mail:email@example.com
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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