A new commercial property survey by the Society of Chartered Surveyors Ireland has calculated that prime office and retail rents in Dublin are expected to rise by 7% and 8% respectively in 2017, while residential development land values in the capital are expected to rise by 15%.
Over 380 estate agents and Chartered Surveyors from all over the country took part in the survey while Future Analytics Consulting was commissioned by the SCSI to carry out the research.
Surveyors expect prime office rents in the rest of the country to increase by around 4% while retail rents are expected to increase by 8% in Leinster (excluding Dublin) 5% in Connacht/Ulster but just by 1% in Munster. Overall, the commercial property sector performed strongly in 2016 with growth recorded across all sectors, although the rate of growth was more moderate than that recorded in 2015.
Chartered Surveyors forecast a sustained but more moderate growth rate in office rental prices in 2017 with an anticipated rental increase of 7% in Prime Grade A in the Dublin Region and 6% growth for most other office types. The anticipated level of growth outside of Dublin is more moderate with a predicted increase of 4% respectively for Prime Grade A and Prime 3rd Generation office rents in the Munster and Connacht/Ulster regions.
The SCSI survey shows that Prime Grade A rents in the Dublin region now average €612 per sqm, representing an increase of 9% on 2015 with net yields of 4.5%.
In the Munster region, chartered surveyors reported a strong increase in growth in Prime Grade A offices as they achieved an average of €243 per sqm, representing an increase of 10% on 2015.
Prime Grade offices rents increased marginally in the Rest of Leinster to €136 per sqm while in Connacht/Ulster it was €148.
The computer and high tech sectors led the office take-up with approximately a third of all take ups followed by business services which accounted for approximately 17% and financial services tanants which accounted for around 14%.
In the retail sector, prime retail zone A units in Dublin achieved rental prices of €5,876 per sqm in 2016 representing an increase of 12% on 2015. Rents for these units are anticipated to increase by 7% over the coming year while growth in all other retail types is forecast to be in the moderate region of 4% to 5%.
In the Rest of Leinster surveyors forecast a strong level of growth in the retail sector, in particular shopping centre rents, which are forecast to increase by 8%, while in the Connacht/Ulster region, a 5% increase is forecast for prime city rents. More moderate growth is anticipated for retail rents in Munster.
Growth in development land values was recorded across all sectors in the Dublin region in 2016. The largest value growth was recorded in the land value of office development land, increasing by almost 17% in 2016, followed closely by residential development land with 14.3% growth.
The highest level of growth in residential land was recorded in the Rest of Leinster Region, increasing from 12% in 2015 to 16% in 2016. Similarly the Munster region recorded increases of 15%.
In all regions, surveyors forecast the highest growth in development land values to occur in the residential sector. In Dublin this land type is expected to rise by 15% in 2017, followed by office development at 12%.
While growth of 10 to 11% is forecast for residential development land in the other regions this figure drops to 3% or under for office development land.
Claire Solon, President of the SCSI said that while it is still premature to accurately predict the impact of Brexit and Donald Trump’s election on the commercial property sector, the results of the survey show that a degree of uncertainty is already apparent.
"The ability of the investment market to weather many potential storms was a highlight of 2016 and it’s clear Ireland is viewed as a safe harbour for international funds in the wake of numerous uncertainties," she said.
"In addition to international events, domestic issues such as solving the housing crisis or changes in the taxation structure for Section 110’s will all impact on investment returns and capital growth expectations going forward. The market likes certainty," she added.
Source: www.businessworld.ie
