Commercial property specialists, CBRE today released their latest bimonthly property market report for May 2019 as the traditional Summer selling season officially commences following what has been a relatively busy start to the year for Ireland’s commercial property market.
According to CBRE, investor demand remains robust and the volume of activity that is underway off-market in the investment, development & hotel sectors of the market is quite considerable. With some sizeable assets on the market and others due to be released for sale over the coming months, these sectors in particular are on track to record impressive transaction volumes in 2019 according to the property consultants.
The most recent MSCI Irish Index shows that the Irish commercial property market achieved a total return of 7.8% in the year to the end of the first quarter of 2019 - a level of return that compares very favourably with returns from real estate in other jurisdictions and with returns from other forms of investment in this extended low interest rate environment.
Yields for shopping centres and secondary retail warehouses have softened a little further over recent months, mirroring a trend that is being experienced in the UK and across Europe at present. Meanwhile, prime office, industrial and multifamily yields in the Irish market remain stable but have potential to harden a little over the coming months as new transactional evidence materialises.
Following a very active first quarter, during which more than 107,000m2 of office accommodation was let in Dublin, the volume of requirements for office space in the Irish capital has continued to rise over recent months with an all-time high of 370,000m2 of active requirements currently live.
While prime headline rental rates in Dublin remain stable at €700 per square metre, rents in the suburbs have experienced an increase over recent months with prime rents in the south suburbs of the capital now in the order of €317.42 per square metre (€29.50 per sq. ft), rents in the north suburbs at approximately €226 per square metre (€21.00 per sq. ft), and rents in the west suburbs trending at approximately €193.68 per square metre (€18 per sq. ft) at present.
CBRE say the Build-to-Rent sector, while clearly not the panacea to Ireland’s housing crisis, nevertheless has a meaningful role to play in helping to address the country’s housing supply demand imbalance by providing much-needed rental accommodation & associated amenities.
The sector has been receiving a lot of focus in recent months as the sheer scale of appetite for this form of investment (from investors and renters alike) has become increasingly tangible. Having accounted for 30% of overall investment spend in Ireland in 2018, this sector is on target to again account for a sizeable proportion of total investment in Irish real estate in 2019.
CBRE’s latest research shows that as much as €6.3 billion is now targetting the BTR sector in Ireland (up from €5.3 billion last year), with 32% of this capital emanating from the US, 24% from Europe, 22% being domestic and 12% from Canada.
In addition to much-publicised demand for Build-to-Rent opportunities in the Dublin market, there is also strong demand for purpose-built student accommodation opportunities in Dublin, Cork and Galway although investment opportunities in this specialist sector are few and far between.
The Irish market has yet to see a grant of planning for a shared living/co-living concept although several promoters are in discussions with planners on this and CBRE expect to see some applications being lodged on sites in the postcodes of Dublin 6, 7 and 8 in due course.
Commenting on the summer ahead, Managing Director at CBRE Ireland, Myles Clarke, “Transactional activity in the Irish investment market has continued at pace over recent months, buoyed by strong occupier market activity. Following the completion of almost €600 million of investment transactions in the first three months of 2019, a number of high-profile assets are currently being marketed, both on and off-market, including several office buildings and Build-to-Rent opportunities."