Notable Improvement In Transaction Volumes In The Irish Commercial Property Sector
Scarcity of prime investment properties to satisfy investor appetite.
Please see link further below to download a full PDF copy of the CBRE|Bi-Monthly Research Report March 2012.
Dublin, February 29th 2011 – Property consultants CBRE today released their March 2012 bi-monthly report commenting comprehensively on the latest trends and transactions in the occupier and investment sectors of the commercial property market in Ireland.
According to the new report, there has been a meaningful level of transactional activity in all sectors of the Irish commercial property market since the beginning of the year and a number of properties are due to come to the market over coming months.
Activity in all sectors of the occupier markets has continued at pace according to CBRE, driven to a large extent by the relative value on offer in the current climate while there are tentative signs of recovery in the investment sector of the market, buoyed by measures announced in the most recent Budget. CBRE say that there are also signs of a significant increase in transaction volumes in the development land and hotels & licensed sectors of the market.
The office sector is expected to continue to perform well over the coming months, fuelled to a large extent by new FDI announcements. There is also opportunistic lease re-gearing with landlords seeking to extend lease terms and tenants on the other hand making efforts to reduce their rental commitments.
The overall rate of office availability in the capital is unlikely to decline to any significant degree despite the underlying level of letting activity being achieved, particularly considering the potential for further rationalisation in the banking and insurance sectors.
Conditions in the retail market remain challenging although from a property perspective, there is considerable activity with new retailers looking to locate here and many existing retailers looking to expand and relocate.
At this point, UK retailers, who are now beginning to experience problems in their home market, are probably a higher risk of going into administration than indigenous retailers who have significantly cut their cost bases following almost four years of austerity.
There is a ready availability of industrial accommodation in all districts in Dublin although there is an emerging scarcity of modern industrial accommodation along key corridors.
A combination of the various measures announced in the recent Budget have restored some confidence in the investment sector. The stamp duty change (reduction from 6% to 2%) had the effect of bringing the IPD index of commercial property values back into positive territory in Q4 2011, following fifteen consecutive quarters in which Irish commercial property values declined.
Two significant office investment assets are now under offer in the Dublin market. Both properties attracted considerable investor interest and will be important benchmarks for pricing in a market that has been starved of meaningful transactional evidence for some time.
A large number of overseas investors continue to seek out opportunities in the Irish market, particularly now that the Government have confirmed that they will not be proceeding with the implementation of retrospective legislation on upward only rent reviews. However, ironically, there is a lack of prime product to satisfy the volume of international demand.
A number of entities are considering bringing Irish loan portfolios to the market.
It appears that a period of weaker performance is now in prospect in the UK investment market. However, the prime end of the London market, which has accounted for more than 40% of capital flows from outside Europe since 2008, is expected to remain largely insulated, with a weight of international capital continuing to seek investment opportuntiies in the capital.
DEVELOPMENT LAND MARKET
There has been a notable increase in the volume of development sites being offered for sale in recent months. To date, most of the sites that have been brought to the market in Dublin have been relatively small. Encouragingly, there is appetite from cash buyers for a lot of these properties (particularly for small infill development sites in key locations) and a number of sales have been achieved.
HOTELS & LICENSED MARKET
Following three years of limited transactional activity in the Irish hotel property sector, there is strong evidence now of keen demand from cash purchasers for prime 3, 4 and 5 star Dublin hotel properties that are competitively priced.
A number of pub properties have changed hands in Dublin recently, demonstrating that there are buyers for properties where the pricing is realistic.
NORTHERN IRELAND MARKET
Conditions in the Northern Ireland property market remain difficult, particularly now that economic prospects for the region are being revised downwards. Nonetheless, activity levels in the occupier sectors of the market remain encouraging.
According to Marie Hunt, Executive Director and Head of Research at CBRE in Ireland “The first two months of 2012 have been busy in the commercial property sector in Ireland. Occupier activity is continuing at pace as occupiers take advantage of the ability to do attractive deals and following two years of inactivity in the investment sector, we are now beginning to see some transactions materialising. There has also been a notable increase in the volume of land, hotel and pub properties being brought to the market, which is encouraging. Rents and yields for prime properties are now showing signs of stabilising although rents and yields on secondary and provincial assets remain under pressure”.
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