Gearing Up for a Very Busy Summer in the Irish Commercial Property Market
Dublin, 1st May 2015 – Commercial property consultants CBRE Ireland today released their latest bi-report focussing on trends in each sector of the Irish commercial property market. According to their May bi-monthly report, activity has continued at pace in the commercial property market during March and April following a strong start to the year and it would also appear that a very busy Summer is now in prospect.
- Click here to download the full report: CBRE Ireland | Bi-Monthly Reserach Report May 2015
- Scroll down to view Head of Research, Marie Hunt's May Bi-Monthly Video Commentary
A considerable volume of assets and loan portfolios are being prepared for sale with up to €500 million of investment assets due to be formally launched for sale in the coming weeks and loan portfolios with a face value of up to €15 billion expected to be brought to the market over the coming months. Demand for investment properties remains strong with several new entrants continuing to emerge, which is encouraging. Yields have stabilised over recent months with rental growth prospects already built into pricing in most instances. Activity in the occupier markets remains strong also with signs of rental growth now emerging in the retail and industrial sectors having been evident in the office sector for some time. We are also seeing increased signs of improvement in rental values in locations outside of Dublin
- According to the latest data from MSCI, total returns in the Irish commercial property market in the first quarter of 2015 reached 4.3% while capital values increased by 2.8% in the period.
- There is increasing evidence of secondary trading of assets and portfolios purchased over the last number of years with a considerable volume of these trades occuring off-market. This secondary trading is occuring side by side with continued deleveraging.
- An increasing number of transactions are now single bid processes which make them more attractive to potential purchasers.
- We have continued to see new entrants to the Irish market over recent months, which is widening the investor pool for specific assets. We have also seen the emergence of some new debt providers in the Irish market over recent months for larger transactions.
- In total, there were 64 office leasing transactions signed in the Dublin market during the first quarter of 2015 – the highest number of individual office leasing transactions to sign in a three month period in 7 years.
- Despite much heralded shortages of Grade A accommodation in the Central Business District, there is availability in other locations, particularly for small to medium sized requirements. We are increasingly seeing occupiers opting to rent premises in more outlying locations of the city and in the suburbs. Indeed, the largest letting to sign in Q1 2015 (a 2,618m2 letting to IT company Parexel) occurred in the Dublin 6/8 district while 5 of the 10 largest lettings completed in Dublin in Q1 occured in the suburbs.
- While there is potentially a lot of new office stock due to come available in the city centre from 2017 onwards, in the intervening period, scarcities will remain in prime locations, which in turn will continue to drive rental values higher. Prime headline rents in the Dublin market are currently in the order of €511 per square metre.
- A number of occupiers are now considering sub-letting or assigning excess accommodation to release much-needed office stock, which is encouraging for the many occupiers who are in the market for accommodation now. We are also witnessing an increasing number of refurbishment projects being undertaken, which has the ability to deliver some new office accommodation to the market in the near term.
- With very few large requirements outstanding, office take-up in Q2 is again likely to comprise a large number of relatively small transactions. We expect prime rents to breach the €538 per square metre (€50 per square foot) barrier over the course of the next few months.
- On the back of improving retail sales, momentum has been building in the better high street, shopping centre and retail park schemes around the country, most of which now have negligible vacancy.
- As competition for the best pitches continues to escalate, we expect to see evidence of rental growth emerging in regional as well as urban locations, albeit from a low base.
- The new owners of many of the retail schemes purchased over the last number of years are now beginning to make their presence felt with more focussed asset management strategies now being adopted. This is turn is freeing up some opportunities in various schemes around the country.
- Toys’R’Us are reportedly looking for up to six stores in Ireland and are expected to announce the opening of their first store in Dublin within the coming weeks.
- A busy couple of months are in prospect for the retail sector with a number of notable transactions expected to be announced between now and mid-year.
INDUSTRIAL & LOGISTICS
- Following a bumper first quarter in which more than 86,000m2 of industrial accommodation was either bought or leased in the Dublin market, activity has continued at pace with several transactions concluding in this sector over recent weeks. As the availability of modern accommodation dwindles further, it will become increasingly challenging to maintain such healthy take-up volumes over the coming quarters.
- Prime headline rents in Dublin now in the order of €70 per square metre and expected to reach €75 per square metre during 2015. Although rental values are not yet at a level that justifies new development, we are witnessing strong demand from developers for any prime industrial development sites that come to the market.
- Prime industrial yields are currently in the order of 6.5%.
HOTELS & LICENSED
- The total volume of hotel transactions signed in Q1 2015 (more than €501 million) was higher than the volume of hotel sales in Ireland in the entire year in 2014. In the first three months of the year, 25 hotel property sales (in 17 separate transactions) concluded in Ireland which included two hotel portfolio sales. This momentum is expected to continue over the coming months with a large volume of hotel assets to be brought to the market. In addition to individual hotel sales, as many as 60 hotel properties are expected to change hands as part of loan portfolios over the coming months.
- Hoteliers throughout the country are reporting improving trading conditions on the back of a strengthening domestic economy and positive tourist numbers.
- Other than the significant Millennium scheme in Naas, Co. Kildare, which was this week launched for sale guiding €35 million and the ‘Project Trinity’ 6.8 acre opportunity in Ballsbridge, which was recently launched for sale guiding in excess of €120 million, most of which has been brought to the market and indeed transacted in the development land market over recent months has been relatively small in size. Indeed, only 17 development land transactions totalling less than €72 million closed in the first quarter of 2015 in this sector.
- Demand for sites remains strong with purchasers increasingly considering a range of potential end uses other than offices and residential, including student housing and hotel projects.
- There continues to be a dearth of residential zoned sites being offered for sale in the Dublin market, with a particular shortage of large lot sizes.
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.