Commercial property specialists, CBRE Ireland yesterday released their first bimonthly property market report for 2020. According to CBRE, in addition to having to contend with property-related measures announced in Budget 2020 towards the end of last year, noise about the status of some open-ended property funds and some unrealistic election manifesto promises in the run up to last month’s General Election created further uncertainty in the opening months of 2020.
Nevertheless, while negotiations regarding the make-up of Ireland’s next administration and the creation of a Programme for Government continue, the property consultants say that activity has continued at pace in the commercial property sector during January and February, boosted to some degree by a healthy carryover of transactions from 2019 which will boost first quarter sales and leasing activity in many sectors.
Total returns from Irish commercial property reached 5.1% during 2019 according to the MSCI Irish Index - a respectable ungeared return that is attractive to long-term investors, particularly when the strength of Irish economic activity and underlying occupational demand is factored in. Activity has continued at pace in the Irish investment market since Christmas with a number of notable transactions completed in the opening months of the year including the sale of several office buildings - Classon House, The Reflector, The Treasury Building, 4&5 Harcourt Street and La Touche House in the IFSC.
Despite political uncertainty, CBRE say that assets are continuing to be launched for sale and demand remains strong. That said, according to CBRE, the sooner there is clarity on the complexion of the next Government the better.
The figures show that demand for office accommodation is at an all-time high and supply is coming on stream in a very controlled fashion. Even before any 2020 transactions are recorded, almost half of all office stock that is currently under construction in the capital has been pre-committed.
Solid occupier demand for new office buildings that are under construction in provincial cities including Galway, Limerick and Cork, which will give rise to leasing transactions being announced in these cities over the coming quarters.
There has been a notable increase in small and medium sized requirements in recent months. Some of this is emanating from indigenous companies that are proceeding with office searches now that Brexit uncertainty has eased; some is from firms wishing to come out of flexible space while some are being triggered by upcoming lease events.
Furthermore, having recorded almost €1.2 billion of trades during 2019, the Irish development land market has started well in 2020, boosted by a carryover of sales which had been agreed towards the end of last year. In addition, there has been considerable activity underway off-market in the opening months of the year, most notably in the industrial land market.
Demand for residential sites continues at pace with particularly strong demand for both zoned and unzoned land in Dublin’s commuter belt. Several strategic sites are being prepared for sale at present while there is a good level of pitching underway giving visibility on pipeline for the coming months.
CBRE say that irrespective of the hue of the next Government, it is clear that all parties aspire to significantly increase housing supply over the coming years and in particular to increase the delivery of both social and affordable housing, which augurs well for the land sector of the market.
According to Executive Director & Head of Research at CBRE Ireland, Marie Hunt said, "Several new mandates have been activated since the beginning of the year and there is good visibility on pipeline over the coming months, which is encouraging to the many investors who continue to seek investment opportunities in the Irish market. Activity in the office and industrial occupier markets remains particularly healthy with new supply continuing to be delivered, albeit on a very controlled and measured basis."
She added, "However, at this juncture, the market requires visibility on the Programme for Government. This is particularly true in the multifamily sector where investors need clarity on the potential for a rent freeze - a measure which has invariably proved counterproductive in many other markets across Europe. Whatever the hue of the next administration, engagement with the industry is critical. We need long-term thinking to bring certainty to this sector, which has a vital role to play in the economy."
Source: www.businessworld.ie
