Commercial property consultants CBRE Ireland has released their latest bi-monthly report focussing on trends in each sector of the Irish commercial property market.
According to their July report, the first six months of 2015 have been exceptionally busy and the market looks set to remain active throughout H2. A key theme is that the recovery first evidenced in Dublin has become increasingly pronounced in provincial locations over recent months.
“Although a traditional Summer lull may be experienced in the occupier markets of the Irish commercial property market during July and August, activity is expected to continue at pace in the investment sector of the market throughout Summer. Several large loan portfolio sales are ongoing and a number of sizeable assets are currently on the market or being prepared for sale. We continue to see strong demand emanating from a range of different investor types including several new entrants from outside the jurisdiction, who are particularly interested in scale. Recent sovereign upgrades have been helpful in this respect enabling a new layer of institutional investors to consider investing in the Irish CRE market.” says Marie Hunt, Executive Director and Head of Research, CBRE Ireland
- The sheer volume of property assets within the various loan books that are currently being marketed and due to be launched for sale over the coming months is quite significant. One of the most noteworthy loan sales that is currently underway is the sale of Project Jewel, including Dundrum Town Centre and 50% interests in both The Pavilions and ILAC shopping centres, which we expect will be keenly bid. In addition to loan sales, there is continued activity in the direct market with many transactions continuing to be negotiated both on and off-market.
- The market is seeing an array of different types of assets being purchased with activity not limited to Dublin to the same degree as previously.
- Prime yields remain stable at the mid-year point, with the exception of prime high street yields which contracted further in recent weeks on the back of new market evidence. There is potential for some further yield contraction in the retail sector considering that rental growth prospects continue to improve in this sector.
- Many of the larger requirements in the market have now been satisfied or are close to being agreed with several technology companies in particular having leased additional accommodation in anticipation of shortages at this point in the cycle. As a result, tenant demand has weakened a little over recent months with most current active requirements relatively small in size. The next wave of take-up in the Dublin office market is most likely to emanate from indigenous occupiers.
- We have recently witnessed an increase in the number of companies sub-letting and assigning surplus accommodation, which is easing supply pressures to some extent.
- Prime headline rents in Dublin are now in the order of €538 per square metre or €50 per square foot although negotiations are taking place in excess of this level. Prime rents in suburban markets are also showing signs of increasing with prime rents in the south suburbs now in the order of €269 per square metre or €25 per sq. ft.
- The ability to negotiate a pre-letting is now considerably more feasible than it was at the beginning of the year.
- At the mid-year point, there is clear evidence that the recovery first experienced in Dublin is beginning to manifest outside of the capital, with healthy levels of demand for good provincial shopping centres and certain provincial high streets now emerging. Demand is also strengthening for accommodation in retail parks around the country, particularly for smaller units of less than 465m2 (5,000 sq. ft.) and for large units extending to more than 1,394m2 (15,000 sq. ft.).
- We expect to see further upward movement in rental values over the course of the coming months as retailer demand continues to improve.
INDUSTRIAL & LOGISTICS
- It appears likely that the bumper take-up of more than 86,000m2 achieved in the Dublin industrial market during the first quarter of the year will be matched (if not exceeded) in Q2, with several large industrial transactions concluding in recent months and a large volume of accommodation reserved at the mid-year point.
- In addition to a number of large transactions in Dublin, many of which were concluded off-market, just as has been evidenced in other sectors over recent months a number of notable transactions have completed in provincial markets recently.
- There has been a welcome increase in the availability of industrial investment opportunities over the last number of months with the continued unwinding of many of the large loan books purchased over recent years now starting to release stock in this sector.
HOTELS & LICENSED
- A total of 39 hotels have sold in the Irish market in the first six months of 2015, totalling more than €575 million between them, not counting the large number of hotels that have changed hands as part of loan portfolio sales in the period. The Project Coney NPL portfolio that traded recently contained numerous hotel assets while a number of NPL portfolio sales that are currently underway contain hotel properties also.
- Just as witnessed in other sectors of the commercial property market over recent months, there is now clear evidence of an improvement in demand for provincial hotel properties with a good depth of both domestic and international buyers competing for assets, particularly those that are sensibly priced.
- 9 pubs totalling €11.4 million have been sold in Dublin in the first half of 2015 while several other pub properties have traded as part of loan portfolio sales in the six month period.
- There is particularly strong demand evident for good residential sites despite some underlying uncertainty as to the future direction of the residential market following recent Central Bank changes. Other sectors driving demand for good sites in the capital at present include office developers, student acccomodation providers and hoteliers.
- 54 individual development land sales completed in the first six months of the year, totalling approximately €276 million between them. This compares with approximately €203 million of transactional activity completed in the development land market during the same period last year.
- The successful public listing of Cairn Homes plc is a hugely significant development for this sector of the market. In recent weeks, this entity have been involved in two significant transactions, namely the acquisition of the 8.11 acre Marionella residential site in Rathgar, Dublin 6 for more than €40 million and lands at Brennanstown Road, Carrickmines, Dublin 18 for a price in the order of €18 million.
- It is hoped that the imminent release of the Department of the Environment’s Urban Regeneration and Housing Bill will introduce measures to improve the viability of housing development in locations that are severely undersupplied.