Dublin,
31
October
2014
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00:00
Europe/Dublin

Strong end in sight for what has been a phenomenal year for Irish commercial property

Dublin, 1st November 2014 – Commercial property consultants CBRE Ireland today released their final bi-monthly analysis for 2014 focussing on trends in each sector of the Irish commercial property market. According to their November bi-monthly report, 2014 has been a record year for the Irish commercial property market with no let-up in sight as year-end approaches. In fact the usual rush to get transactions signed by year-end will be even more intense this year with the Capital Gains Tax (CGT) relief due to expire on December 31st. According to the author of the report, Marie Hunt, Executive Director and Head of Research at CBRE Ireland, “2014 has been a phenomenal year for the Irish commercial property market with the volume of transactional activity in almost every sector of the market exceeding expectations and a solid recovery in values being experienced across the board.”

INVESTMENT

  • Several records were broken in the Irish investment market during Q3 2014. In addition to a record total return of 11% being achieved from Irish commercial property during the three month period according to the IPD Irish Index, CBRE Research shows that the total volume of transactional activity achieved in the quarter was the highest on record in the Irish market
  • With almost €3 billion of asset sales over €1 million in value completed in the first nine months of 2014 alone, it is likely that over €4 billion of asset sales will have transacted by year-end. This is a remarkable result considering that up to €17 billion of Irish loan sales also transacted during 2014
  • Demand is particularly strong for prime office and retail properties, as evidenced by the appetite for the Project Parks retail portfolio where a preferred bidder has now been selected
  • The recent decision by the German insurance company Allianz Real Estate to invest €140 million in the IPUT fund is testament to the growing demand from institutional investors to purchase Irish real estate, both directly and indirectly

OFFICES

  • Having achieved take-up of almost 130,000m2 in 149 individual transactions in the first nine months of 2014 and with several transactions in legals at present, the Dublin office sector is firmly on target to exceed its annual average volume of leasing activity (160,000m2) again this year
  • Supply shortages in the Central Business District (CBD) have seen prime rents in Dublin 2/4 growing by more than 28% during the first nine months of 2014 and by almost 50% on an annualised basis with prime headline quoting rents in the capital now at €484 per square metre (€45 per square foot)
  • The Grade A vacancy rate in Dublin 2/4 has now reached an all-time low of 1.9%

RETAIL

  • The resurgence in economic activity and consumer sentiment witnessed in Ireland during 2014 is becoming increasingly evident in the retail property sector with strong demand for retail premises now starting to manifest itself outside of the prime market and signs of rental growth re-emerging in regional locations
  • Retailers are more confident going into this Christmas selling season than at any time over the last seven years which in turn is fuelling demand for retail premises in good locations
  • Although Dublin has been experiencing strong demand from retailers for some time, we are finally beginning to see recovery emerging outside of the capital, particularly for good shopping centre and retail park units that come available

INDUSTRIAL

  • Following a somewhat disappointing first half to the year, take-up in the industrial sector improved during Q3 with total take-up of almost 110,000m2 achieved in Dublin in the quarter, bringing total take-up to almost 195,000m2 during the first nine months of 2014. A similar volume of activity to that achieved in Q3 will be required again in Q4 if annual take-up is to match the strong volume of activity achieved last year. This may well occur as a result of additional pressure to get transactions closed before year-end in order to avail of the Capital Gains Tax (CGT) relief, which is due to expire on 31st December
  • A lack of speculative development over the last few years is now leading to supply demand tension in some locations which is kick-starting rental growth in this sector. Prime headline quoting rents in Dublin are now approximately €65 per square metre

HOTELS & LICENSED

  • 45 hotel properties were sold in Ireland in the first nine months of 2014, totalling almost €280 million between them. This is remarkable considering that 33 hotels totalling €160 million transacted in the entire year in 2013
  • In addition to many individual hotel sales that have occurred over the last number of months, a number of hotel portfolios have recently been offered for sale including the Venue Collection; the Moran & Bewley’s Hotel Group and Project Nadal, which between them will boost hotel transaction volumes considerably

DEVELOPMENT LAND

  • In total, approximately 78 development land sales totalling over €334 million were completed in the Irish market in the first nine months of 2014. The value of land sales in the first three quarters of 2014 is higher than the value of land sales completed in the five years between 2009 and 2013 combined, demonstrating the escalation in land sales that has occurred over the last 12-18 months
  • Much of the focus in the development land sector over recent months was on the sale of Project Cherry - the sale of 400 acres in Cherrywood in South Dublin. This property attracted considerable attention on the basis that it was the first major landbank to be offered for sale for some time. There was strong competition from a number of different consortiums for this asset with Hines and King Street Capital being selected as the preferred bidders having reportedly bid €270 million
  • Changes to the controversial 80% rezoning windfall tax in the recent Budget have been broadly welcomed and will hopefully help to unlock some land for housing development in due course. However, an opportunity was missed to implement measures to improve the feasibility of the development of private housing
  • In addition, proposed new Central Bank mortgage rules and recently announced changes to social and affordable housing rules, the imposition of a levy on vacant sites (and potentially vacant retail units) have created huge uncertainty. Developers will require clarity on all of these issues before there will be a meaningful improvement in the delivery of much-needed housing, particularly in the Dublin market

ENDS

CONTACT: 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 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 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 130 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


click to download:CBRE Ireland | Bi-Monthly Reseach Report November 2014