Dublin,
28
February
2015
|
00:00
Europe/Dublin

Gearing Up For Another Strong Year In The Irish Commercial Property Market

Dublin, 1st March 2015 – Commercial property consultants CBRE Ireland today released their first bi-monthly analysis for 2015 focussing on trends in each sector of the Irish commercial property market in the opening months of the year. According to their March bi-monthly report, activity has continued at pace in the commercial property market during January and February following a record 2014. Although transactional activity has been subdued during the first two months of the year compared to Q4 (when activity was fuelled by the ending of the Capital Gains Tax (CGT) waiver on December 31st), there has been a lot of work done since Christmas on preparing assets and loan portfolios for sale over the coming months, suggesting that another busy year is in prospect.

According to the author of the report, Marie Hunt, Executive Director and Head of Research at CBRE Ireland, “Across all sectors of the Irish commercial property market, there has been a busy start to the year with a huge focus on preparing campaigns and getting assets and loan portfolios ready to launch. We are seeing increasing appetite from both local and international institutional investors, particularly in light of the attractive returns being generated from Irish real estate in the current low interest and low inflation environment. The market is transforming from one dominated by opportunistic investors to one that is being targeted by an increasing number of core investors with several new entrants emerging over recent months, which is encouraging”.
 

INVESTMENT

  • The Irish investment market has continued to perform strongly in the first two months of 2015 with good appetite prevailing for new opportunities.
  • Many of the larger investment transactions that have been agreed since Christmas have comprised office properties with the most notable being the sale of Project Tara for a combined price of almost €300 million although more retail properties are expected to be offered for sale over the coming months.
  • In addition to strong volumes of deleveraging activity, there has been more secondary trading of assets purchased as part of asset and loan portfolios over the last number of years, with many of these transactions occurring off-market. Buyers are increasingly focussed on participating in one-stage sale processes such as private treaty in an effort to streamline activity in what is now a very active market.
  • There has been a discernible increase in appetite from German institutional buyers in recent months while the relative weakness of the Euro is also attracting interest from UK and US buyers.

OFFICES

  • Following record take-up of almost 225,000m2 being achieved in the Dublin office market during 2014, January and February have seen a continuation of activity in this sector of the market with a number of notable lettings being negotiated and signed during the first two months of the year.
  • A notable trend over recent months is an increase in leasing activity by the public sector. There has also been an increase in demand for office premises from aircraft leasing companies and pharmaceutical companies.
  • There has been an increased focus on office development over recent months with several planning applications being lodged and prepared as well as several office refurbishment projects being announced since the beginning of the year.
  • Prime rents today are in the order of €484 per square metre (€45 per square foot) although many buildings are now quoting headline rents of between €511 and €538 per square metre (€47.50-€50 per sq. ft.) which raises concerns about competitiveness and points towards stronger rental growth emerging in outlying and suburban locations over the coming months.

RETAIL

  • Demand for accommodation in the better shopping and high streets around the country remains strong with particularly strong appetite from coffee shops and restaurant and food providers.
  • Many border towns have been reporting stronger trading performance over recent months due to an increase in shoppers from Northern Ireland coming south to take advantage of the current exchange rate differential.

INDUSTRIAL & LOGISTICS

  • There has been some evidence of an increase in the availability of funding for well-established businesses wanting to purchase industrial & logistics premises although development funding as yet remains elusive in this sector and we are not anticipating any speculative development to emerge until 2016. This will continue to drive demand for ‘design and build’ projects as the scarcity of good accommodation continues to erode.

HOTELS & LICENSED

  • The removal of the Capital Gains Tax (CGT) waiver last December doesn’t appear to have dampened demand in the hotel and licensed sector in the opening months of 2015 with activity continuing at pace and several notable sales having completed since the beginning of the year.
  • The most significant opportunity currently being offered for sale in this sector is The Crystal Collection of seven provincial hotels, which is guiding €35 million. It remains to be seen whether the next wave of hotel sales to be launched over the coming months will take the form of asset sales or loan portfolio sales.
  • Latest performance figures for the hotel sector confirm that occupancy rates and RevPar numbers were up year-on-year in all locations in 2014. This bodes well for another strong year in 2015, particularly in light of the favourable economic backdrop, low oil prices and the weakness of the Euro relative to Sterling and the US dollar at present which will help boost tourist numbers in 2015.

DEVELOPMENT LAND

  • A number of development opportunities are currently being prepared for sale, which should see strong activity being recorded in this sector of the market over the coming months.
  • There has been a notable increase in the number of alternative lenders and private equity firms looking for opportunities to provide development funding in the Irish market over recent months.
  • With many would-be purchasers now effectively forced to rent as opposed to buy at least until such time as they have saved a more substantial deposit to get onto the property ladder as a result of recent Central Bank changes, it is inevitable that residential rents will continue to rise, particularly in urban centres.

    CONTACT: Marie Hunt – 00 353 (0)1 618 5543 / 00 353 87 2727115 or e-mail:marie.hunt@cbre.com

    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 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 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.eu

    In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 140 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

     

    CBRE | Bi-Monthly Research Report March 2015

     

    Published on: 01 03 2015