The latest bi-monthly analysis of trends in the Irish commercial property market from agent CBRE reports “phenomenal deal flow” as the autumn selling season begins. It also expects the anticipated ending of the capital gains tax (CGT) waiver to add additional pressure to get property transactions signed by year-end.
"There has never been a busier July and August in the Irish investment market or the hotels and licensed sector than that experienced in 2014, with transactions being completed right throughout the summer and several portfolios and assets launched for sale in this period," said Marie Hunt, head of research at CBRE Ireland.
CBRE reports that Irish commercial property achieved a total return of 8.5 per cent in the second quarter of 2014 – the highest quarterly return since 2006 – while the annual return in the first six months of 2014 stood at 26.6 per cent.
The scale of activity is best illustrated by the fact that Dublin recorded the seventh-highest volume of investment activity in the Emea region in the first six months of 2014 – its first time to appear in the top-10 ranking since 2006.
“While investors remain focused on office investment opportunities, much of what will be offered for sale over the coming months is expected to comprise retail portfolios,” said Ms Hunt. “Investors continue to focus on asset management angles and rental growth potential, which is likely to be frontloaded over the next two years until such time as new supply starts to come on stream.”
The report notes that take-up in the Dublin office market reached 97,500sq m (1.049 million sq ft) in the first half of 2014 with rents up 15 per cent over the period.
There is an “ever-increasing scarcity” of prime Dublin 2/4 office buildings to satisfy the volume of occupier requirements.
“Prime office rents in Dublin 2/4 have risen again over recent months,” says the report, “with several transactions in D2/4 now being negotiated at €457.50 per sq m (€42.50 per sq ft) and rents likely to reach €484 per sq m (€45 per sq ft) before long.”
Rental values in the IFSC are starting to rise, according to Ms Hunt, and this will spill over into other locations in the city and the south suburbs as the year progresses.
As a result, many occupiers with large office requirements will have to concentrate on securing pre-letting deals or developing their own premises in the absence of new speculative accommodation being completed until at least 2016.
The report points to “negligible” vacancy rates in many of Dublin’s main shopping streets and retail schemes with some retailers frustrated by the scarcity of available properties in prime locations. Zone A rents are €4,500 per sq m (€418 per sq ft) on Grafton Street, €3,500 per sq m (€325 per sq ft) on Henry Street and €2,500 per sq m (€232 per sq ft) in Blanchardstown.
Transactions in the industrial sector are “taking a long time to close at present”, says CBRE, and it appears unlikely that last year’s record volume of industrial take-up in Dublin will be repeated. There is also a lack of good-quality industrial investment opportunities to cater for demand, with the result that some occupiers and investors are purchasing vacant industrial facilities in need of refurbishment. Prime Dublin industrial rents are now €62 per sq m (€5.75 per sq ft) with prime provincial rents at €33 per sq m (€3.06 per sq ft).
Ms Hunt said July and August were the busiest on record in the hotels and licensed sector and that a busy autumn was in prospect.
The report predicts a rise in the volume of development land coming to the market in the weeks ahead, fuelled by the need to have transactions completed by year-end in advance of the impending phasing out of the CGT waiver.
