Very strong first six months in the Irish commercial property market
CONTACT: Marie Hunt – 00 353 1 6185543 / 00 353 87 2727115 or e-mail:email@example.com
Please see links further below to download a pdf copy of the full report & a market commentary video of Marie Hunt discussing some of the key trends at the mid-year point.
Dublin, 1st July 2013 – Commercial property consultants CBRE today released their mid-year report, focussing on trends in all sectors of the Irish commercial property market in the first half of 2013. The property consultants say that the first half of the year has been extremely active in many sectors of the Irish commercial property market with more transactions recorded in the six month period in some sectors than in the entire year last year and in some cases higher than the volume of transactional activity recorded during 2011 and 2012 combined. The weight of money chasing prime real estate in some sectors has also led to an improvement in pricing in the first six months of the year although CBRE point out that the market is not homogenous with varying trends being evidenced across different property sectors and locations.
According to Marie Hunt, Executive Director, CBRE Ireland “There is strong demand for prime Irish real estate, particularly in Dublin, as has been evidenced by the volume of transactions and the pricing achieved for some trophy assets over the first six months of 2013. There are tentative signs of rental growth emerging for prime assets and prime yields have contracted faster than was anticipated during the first six months of this year. The focus for the next few months will be to finalise the many transactions that are currently in negotiations and in legals with a lot of new properties expected to be released for sale in the early Autumn. This is clearly necessary with more buyers than sellers in some parts of the market. The ending of the Capital Gains Tax waiver at the end of 2013 will undoubtedly boost transactional volumes in the latter half of the year as buyers vie to get transactions closed by year-end”.
OFFICE & INDUSTRIAL MARKET
- The controversy over Ireland’s tax haven status appears to have had no discernible impact on occupier demand in the Dublin office market over recent months according to CBRE. Take-up of approximately 70,000m2 was achieved in the Dublin office market during the first six months of 2013 – approximately 25% higher than the volume of letting activity in this sector in the same period last year
- In addition to leasing activity, as has been the trend for many quarters now, a number of office sales have also been recorded over recent months with some occupiers purchasing buildings for occupation and others purchasing office redevelopment projects
- There is an encouraging volume of active requirements from companies such as Deutsche Bank, Squarespace, Indeed.ie, Wonga, Groupon and Dropbox while the recently announced requirement from KPMG for a new headquarters building in Dublin city centre by 2017 of between 16,722m2 and 18,580m2 has been well received. This in turn is reigniting the debate about the emerging scarcity of Grade A office accomodation in the capital and the need to commence new development in Dublin city centre in due course
- Speculative development will not be feasible without a further improvement in office rental values from current levels of approximately €323 per square metre (€30 per sq ft)
- The vast majority of the capital’s office requirements currently emanate from the price-sensitive technology sector
- Activity in the industrial sector of the property market is largely dominated by a number of large transactions from a range of corporate occupiers including pharmacueutical companies, research and development companies, data centre operators and medical device manufacturers
- The Irish retail market continues to be somewhat of an enigma with retail sales remaining subdued and significant churn going on in high streets and shopping centres throughout the country. However, according to CBRE, on the other hand strong volumes of transactional activity are being recorded in the retail property sector
- There is still evidence of some new retail entrants looking for a presence in the Irish market as was evidenced in recent weeks by the US retailer Vans agreeing to open their first Irish store on Grafton Street
- However, most transactional activity is emanating from existing retailers who are either relocating or expanding
- Retail landlords have had to review the terms of leases in many locations across the country over recent months, particuarly in cases where retailers have entered administration in an effort to force their hand. Although the examinership route is prohibitively expensive for most retailers, CBRE expect to see some other retailers following suit and strategically going into examinership over the coming months in an effort to cut their Irish operating costs
- The volume of spend on income-producing investments (excluding loan sales) in Ireland in the first six months of 2013 (more than €600 million) was higher than in the entire year last year which demonstrates the depth of demand and the improvement in transactional activity witnessed in this sector since Autumn 2012
- There has been very strong demand for prime commercial real estate during the first half of this year with some new investors adding to the weight of money already chasing assets in the Irish market. As a result, prime yields have strenghened faster than most was anticipated with prime office yields in Dublin in the order of 6.25% and prime high street retail yields in the order of 5.75% at the mid-year point and likely to strenghen further
- With more buyers than sellers for investment properties in the Irish market, underbidders are becoming increasingly frustrated so there is a clear need to increase the volume of investment properties being offered for sale to cater for demand. There are some good assets coming to the market over the coming weeks and Autumn looks set to be very busy with some further strenthening of yields anticipated as the year progresses
- The establishment of Ireland’s first REIT by Green Property is broadly welcomed
- There was more development land sold in Ireland during the first half of 2013 than in the two previous years combined, which clearly demonstrates the appetite for strategic sites in key locations. A number of sites sales have been agreed recently, both on and off market
- Over the coming months, the focus will be on getting as many land sales as possible completed before the next wave of sites come on the market as anticipated in Autumn. There is certainly a clear need for more sites to be offered for sale to cater for the current volume of demand for well situated opportunities
HOTELS & LICENSED MARKET
- The European Presidency and The Gathering appear to have had a better than expected impact on the hotel market - in Dublin at least - in the first half of 2013, as is evidenced by stronger tourist numbers compared to the same period last year
- There has been a continuing improvement in the performance of Dublin hotels in the first half of 2013 with the latest STR Global figures confirming 33 consecutive months of Revpar and occupancy rate growth in the capital
- There were 13 hotel sales concluded in Ireland during the first six months of 2013, 10 of which occurred in the last 3 months alone. The total value of hotel sales in Ireland in the first half of the year was €42.5 million
- With the Government’s generous capital gains tax waiver running out on December 31st this year, there is a limited window of opportunity to complete deals with purchasers who will need to have transactions completed by year-end
NORTHERN IRELAND MARKET
- The hosting of the G8 Summit in Co. Fermanagh in recent weeks and the announcement of an economic stimulus plan for Northern Ireland has given a notable boost to the region in recent weeks and is expected to generate dividends for some time to come, particularly in the hotel and tourism sector
- Most of the activity in the office sector in Belfast at present is relatively small in size with many companies opting to remain in flexible serviced office accommodation despite it being a more expensive option. With the scarcity of Grade A office accommodation a concern, the news that NAMA intend to provide £15 million in funding to complete two office buildings Lanyon Plaza and The Soloist Building at Lanyon Place in Belfast has been widely welcomed
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