New Term to Unleash Another Wave of Commercial Property Transactions in Ireland
Dublin, 1st September 2015 – Commercial property consultants CBRE Ireland today released their latest bi-monthly report focussing on trends and transactions in each sector of the Irish commercial property market. According to the September report, a very busy Autumn season is now in prospect with several large transactions expected to conclude and a surge in the volume of property assets expected to be formally launched for sale. Indeed, CBRE expect up to €400 million of retail investment opportunities and another €400 million of office investment opportunities to be formally launched for sale over the coming months. The property consultants expect that appetite for large assets will become more pronounced over the coming months as investors seek to deploy capital before year-end.
Click here to download the full report: CBRE | Bi-Monthly Research Report September 2015
Scroll down to view Head of Research, Marie Hunt's September Bi-Monthly Video Commentary
Although the traditional Summer lull was experienced in the occupier sectors of the Irish commercial property market during July and August, activity continued at pace in the investment, development and hotel sectors of the market throughout Summer. As the new season kicks off, we expect another surge in activity with several high-profile transactions due to complete and a large volume of commercial real estate assets set to be brought to the market over the coming months. Although there are understandably some concerns about the potential impact of recent stock market volatility and the uncertain macro-economic and financial backdrop, as long as interest rates remain low, real estate remains an attractive proposition and supply shortages in some sectors of the Irish market will prolong this momentum, particularly when economic and rental growth projections are factored in
- The most recent performance data for the Irish commercial property market produced by MSCI shows that a total return of 6.4% was achieved from Irish real estate in Q2 2015 with annualised returns of 33.7% being achieved to the mid-year point.
- There is particularly strong demand for large assets as investors look to get money into the market quickly, as demonstrated by the appetite for assets such as Dundrum Town Centre, which forms part of the Project Jewel portfolio that is expected to conclude shortly. This appetite for large assets will become even more pronounced over the coming months as investors seek to deploy capital before year-end.
- The sale of Project Trinity to Chartered Land and new entrant ADIA during the Summer was particularly significant in that it represented the first significant deployment of Middle Eastern capital in the Irish market. Similarly, the decision by German investor Union to forward-fund the Burlington House office building in Dublin 4 was also noteworthy.
- In addition to continued loan sale activity, CBRE estimate that a large volume of commercial real estate assets will be offered for sale over the coming months. The property consultants estimate that retail properties with a combined value of more than €400 million will be launched for sale over the coming months with a further €400 million of office properties also expected to be formally offered to the market.
- CBRE also expect to see some additional multifamily investment opportunities emerging although the property consultants warn that investors will invariably tread cautiously until there is more clarity on proposed Government plans to introduce rent controls in the residential sector.
- Activity in the Dublin office market slowed during the traditional Summer season. However, a number of new requirements have been activated recently which will see renewed activity over the course of the coming months.
- Many of the requirements in the market at present are relatively small with particularly strong demand for accommodation of between 465m2 and 1,395 m2 (5,000 sq. ft. and 15,000 sq. ft.).
- Landlords are now placing greater emphasis on covenant strength. This will invariably prove challenging for some occupiers, particularly ‘high growth’ companies such as some of those in the technology sector.
- Although there are now a total of 19 office schemes under construction in Dublin, the new accommodation these schemes will provide amounts to just over one years annual average take-up and approximately 45% of this new accommodation is already committed.
- There has been considerable activity in the development sector over recent months with several new schemes entering the planning process and others commencing construction.
- Prime rents in Dublin city centre now stand at approximately €565 per square metre (€52.50 per square foot). Although there is an increased focus on office development, it will be 2017 before there is a meaningful improvement in supply and rents will inevitably continue to rise in the interim.
- The recovery in consumer spending and retail sales appears to have strengthened further over the Summer months with bad weather having actually boosted footfall and trading patterns in many locations around the country.
- Retail property specialists were busy over the summer months, completing due diligence on the many retail investment portfolios being offered for sale, not least Project Jewel; the National Portfolio and an interest in St. Stephen’s Green Shopping Centre in Dublin.
- As the traditional Autumn selling season kicks off, the biggest challenge facing the retail sector of the market is a scarcity of properties in the locations and schemes that retailers are specifically targeting, with many prime high streets and shopping centres now boasting full occupancy. This will force some pop-up or temporary retailers (who normally start to look for Christmas premises at this stage in the year) to opt for secondary streets and schemes this year.
INDUSTRIAL & LOGISTICS
- Transactional activity in the industrial and logistics sector paused for breath to some extent during July and August following a bumper first half of the year during which more than 185,000m2 of take-up was recorded in the Dublin market.
- There was considerable activity in the data centre sector of the market during the Summer with Facebook having been granted planning permission for a data centre on the M3 motorway at Clonee, County Meath and Google announcing plans to develop a second data centre alongside their existing facility at Profile Park off the M7 motorway.
- Demand for prime industrial sites which has been increasing of late is fuelled by an increase in demand for greenfield design-and-build solutions from occupiers that are frustrated by the scarcity of supply of modern accommodation along primary road networks.
- With a large proportion of available stock now reserved and no new stock expected to be developed anytime soon, there is potential for a notable spike in prime rental values over the coming quarters as new market evidence materialises.
- Demand for new industrial and logistics stock continues to strengthen although we do not expect to see any speculative development until well into 2016.
HOTELS & LICENSED
- Following an extremely busy first half to the year in which 39 hotel properties (totalling €575 million) changed hands in the Irish market, the months of July and August were the busiest on record in terms of hotel transactional activity. In total, more than 12 Irish hotel transactions closed during the Summer months. This coincided with one of the busiest tourist seasons experienced in the Irish market for many years, which in turn boosted hotel performance around the country (despite the weather!).
- Chartered Land and ADIA emerged as the successful bidders on the Project Trinity sale of 6.8 acres in Ballsbridge, Dublin 4, which included both the Clyde Court and the Ballsbridge Hotel. It remains to be seen what impact, if any, this noteworthy sale will have for hotel availability in the capital over the coming years with developments expected to be closely monitored by hoteliers and industry observers alike.
- Following a very active Summer season, there is now a scarcity of hotels to satisfy inherent volumes of demand from hoteliers and investors. The need to release more hotel assets for sale during the Autumn to cater for this demand is becoming increasingly apparent.
- Summer 2015 saw the release of a raft of new reports and announcements which have relevance for the development sector of the market.
- The €276 million of development land sales that transacted in the first half of the year is set to be significantly surpassed in H2 considering some of the larger transactions that were announced over the last couple of months, not least the sale of the Project Trinity 6.8 acre development site in Ballsbridge, Dublin 4 for more than €170 million and the sale of 3.7 acres and 4 empty office buildings at AIB Bankcentre, Ballsbridge, Dublin 4 for €67.5 million. With the exception of these large transactions, most land sales remain relatively small in size, which in itself is hampering efforts to increase residential supply.
- As the traditional Autumn selling season commences, CBRE expect to see an increase in the volume of land being offered for sale as pressures to increase housing supply intensify even further.
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.