A new commercial property survey by the Society of Chartered Surveyors Ireland has found that prime office and retail rents in Dublin are expected to rise by 5% and 6% respectively in 2018, while prime industrial rents in the capital are expected to rise by 7%.
Over 400 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 nationally to increase by 5%, prime retail rents to rise by 7% and prime industrial rents to increase by 6%.
While rents and values across all commercial property are predicted to rise this year, the report found that prime office rents in Dublin are expected to increase at a slightly slower pace than was expected in 2017.
The office sector was by some margin the most active commercial property sector in 2017, particularly in Dublin where there was a record take up of office space (325,000 sqm – 344,000sqm). That said, Cork has also experienced a significant increase in demand for office accommodation, particularly in city centre and prime business park locations. The success of the office market last year reflects the pattern of growth over the last few years which has been directly linked to Ireland's positive economic recovery.
According to the Report, 7 out of 10 surveyors in Dublin believe the availability of office space will increase this year while over half believe vacancy rates will continue to decrease. In Munster, 62% of surveyors believe the availability of office space will increase while 92% believe vacancy rates will decrease.
In Connacht/Ulster 64% of surveyors believe take-up will increase and vacancy rates will decrease. Surveyors in both Dublin and Munster said the main issue was the shortage of quality office space. By contrast, in the Rest of Leinster 86% of surveyors said they believed availability will remain the same while they saw their main challenge as lack of demand.
The report shows that following a dynamic performance in 2016, the retail market performance in 2017 can be considered modest. In Dublin, median prime retail rents are €6,000 per sqm, in Connacht/Ulster they are €1,150 per sqm, in Munster they are €1,100 per sqm, while in the Rest of Leinster they are €340 per sqm.
While rents in the Rest of Leinster are predicted to grow the most this year – by 9% – the SCSI said it is clear the province is playing catch up with the other regions.
Thirty nine percent of surveyors in Dublin believe Brexit will have a positive impact on business activity, but this drops to 9% in the Rest of Leinster and zero in Munster and Connacht/Ulster. SCSI members in the border region especially believe weaker sterling and market uncertainty has already impacted property investment in the area.
The other main challenges identified by surveyors for the year ahead in this report are the shortages of suitable property, the rise of online shopping (over half of surveyors believe online is having a major impact on retail) and the effects which the rising costs of housing may have on business relocation decisions and FDI generally, particularly in Dublin.
Speaking on behalf of the Society of Chartered Surveyors Ireland, James Mulhall, who is Managing Director of Mulhall Murphy, said "A commercial property market is a subset of the economy in which it exists and that is reflected in the findings of this survey. Chartered Surveyors are predicting prime office rents will rise by up to 7.2% in Munster this year, prime industrial rents will rise by 8.9%, while prime retail rents will rise by 5%. However, when you see that prime retail rents in Dublin are €6,000 per sqm, over 6 times the national average and prime office rents are €638 per sqm, over 3 times the national average, you realize the scale of the rental imbalance which exists."
He added, "At the other end of the scale, Sligo, where the Government recently announced the National Development Plan, has the highest commercial vacancy rates in the country of 19%. With current rent levels in Dublin heading back towards 2007 levels, we need Cork, Galway and other cities to provide viable alternatives for sustainability in the overall commercial property market."