Investor demand remains strong, to the extent that we expect some further price sharpening over the coming mths
€492m of investment sales in Q1 2017 and up to €1bn of investment transactions currently in play
Despite continued uncertainty around Brexit, it is encouraging that activity has continued at pace across all sectors with very strong volumes of Dublin office leasing activity ytd - 50,000m2 signed in Q1 alone
Notable increase in interest in forward funding opportunities since the beginning of the yr
31 office schemes under construction in the Dublin office market (380,000m2) of which >30% is already pre-let
Meanwhile the Cork office market has 20 office schemes at various stages of the planning process but only 3 of which are currently under construction
Industrial sector produced best rental growth in the first 6 mths with prime rents up 6% to €99.50 psm
Scarcity of housing in the Dublin market remains one of the biggest issues facing the market, and indeed the Government at this juncture
Larger development sites & portfolios expected to be offered for sales in the second half of the yr
Prime Zone A rents on Grafton St remain stable at €6,300 psm but scarcity of stock in core locations is the biggest challenge facing the retail sector
Up to €250m of hotel sales expected in Ireland in 2017
Busy H2 in prospect with 2017 transactional activity expected to be heavily weighted towards the second half of the yr
Take-up in the Dublin industrial sector reached almost 70,000m2 in Q2 2017, bringing total take-up in the first half of 2017 to almost 121,000m2 – almost exactly on par with take-up in this sector in the first half of last year
Lettings of industrial buildings accounted for 45%
In total, there were 45 industrial transactions signed in Dublin in Q2 2017 of which 29 comprised lettings and 16 comprised sales
Transactional activity in the industrial sector during Q2 2017 was primarily focused on the Dublin South West (N81) corridor
Prime industrial rents in the capital rose by 6% in the first half of 2017 and now stand at approximately €99.50 per square metre
Industrial properties accounted for 6% of total investment spend in Q2 2017 and 8% of spend in the first half of 2017
Prime industrial yields remain stable at 5.50% at the end of Q2
Strong demand for ‘Alternative’ investment in Ireland, in particular on 3 sectors: BTR, PBSA & Healthcare
BTR concept firmly established in many jurisdictions such as the US, where it is now regarded as a mainstream sector with superior returns to more traditional forms of CRE investment
BTR has gained popularity in EU & UK in recent yrs but is as yet only at an embryonic stage in the Irish market
Rationale for BTR in Ireland - additional 174,000 households renting in the last 10yr period & potential for an additional 23,300 households entering the rental sector by 2021
PBSA as a sector has also gained popularity with several specialist funders & investors focussing on opportunities to invest in student residences, both on & off campus
Where the key attraction of PBSA is the high levels of occupancy that can be attained if facilities are appropriately managed , particularly where alternative uses can be maximised outside of the traditional academic year (e.g. occupation by tourists during summer months)
Increased demand for investment in the healthcare sector in Ireland is being driven by a dramatic change in the demographic profile, a hospital system that is under huge pressure & a general move towards investment in alternative sectors
This trend is only going to escalate over the coming yrs as the Irish population continues to age - with a 19% increase in over 65’s b/t 2011 & 2016 13% of the Irish population is now classified as dependent - an increase of 36% within the last decade & which is expected to increase to 16% by 2026
A Why Dublin? Why Now? report examining the economic, occupier & investment drivers that make investment in the Dublin office market compelling
With a focus on 3 elements in particular, namely:
The compelling economic backdrop;…Ireland’s economy continues to perform exceptionally well, having grown by 5.2% in 2016 and projected to grow by at least 3.5% in 2017
The strength of occupier market activity in Dublin’s office market;…. Average take-up in the Dublin office market over the last five-year period has remained very consistent at approximately 200,000 m2 pa
And key investment fundamentals;…. Prime rental growth projections for 2017 in excess of EMEA averages with superior rental growth projections for secondary & provincial assets
CBRE Ireland Viewpoint Cork Office Supply June 2017
A Viewpoint paper looking at potential future supply in the Cork office market
According to our research there is almost 220,000m2 of new office stock in 20 individual schemes at various stages of the planning process with 63% located in Cork city centre & 9% located at Cork Airport
4 of the 20 schemes are redevelopment projects, while 16 are new schemes - with only 14% currently under construction, equating to 31,100m2 of new office stock across 3 individual schemes
A further 15 office schemes have been granted planning permission in the Cork region - providing the potential to deliver up to 171,696m2 of additional office accommodation in due course
However, despite increased demand, it is likely that construction of these new schemes won’t proceed until funding has been obtained and / or pre-lettings have been secured
Only 5% of Cork office stock with planning (but not yet on-site) is expected to be ready for occupation by 2018 with a further 19% anticipated to be delivered by 2019
While almost 54% has an expected completion date of 2020 and 22% is not expected until 2021 or beyond
Speculation that Dublin could benefit from Brexit-related office relocations escalated following Theresa May’s commentary in Jan 2017, seemingly suggesting that passporting may not be an option for UK based financial service companies
Despite reports to the contrary, Dublin has more than enough office stock in the pipeline to cater for any additional demand from Brexit relocations
Dublin office market extends to > 3.7m m2 (40m sq.ft.) of which > 60% is located in the city centre
Annual average take-up in the Dublin office market over the last 10 yrs was approx. 182,000m2 (2m sq. ft.) pa with total 2016 take-up reaching >246,000m2
⅓ rd of 2016 take-up comprised US companies with a further 11% of take-up by UK companies
Overall office vacancy rate @ end Q4 2016 was in the region of 6.6% which compares well with other competing cities
As @ end Q4 2016, there was approx. 250,000m2 (1.37 x Dublin’s annual average take-up in the last 10 yr period) of office accom. available to let, contradicting the view that there is no office stock available to let in Dublin at present
In addition to vacant stock, there is >360,000m2 (3.87m sq.ft.) currently under construction in the city centre in 27 individual schemes, of which 20% is currently reserved
This equates to just >2 yrs. of average take-up and will add approx. 10% to Dublin’s office accom. stock
Of the >360,000m2 (3.87m sq.ft.) of office accom. currently under construction, 60% is due for completion in 2017 with a further 39% due for completion in 2018
31% of the stock that is under construction and due for completion in 2017 has already been pre-let
Meanwhile, a further 543,000 m2 (5.84m sq.ft.) in 48 individual schemes has a grant of planning permission & could also be commenced if required
While a further 48,323m2 (520,171 sq. ft.) of stock has been applied for in the city centre
In summary, the visibility on potential delivery should give comfort to potential occupiers that Dublin is more than capable of providing sufficient high quality office accommodation if required
The bigger issue for Gov to tackle, which is already being addressed, is to ensure that there is sufficient housing & adequate infrastructure to facilitate this additional demand, if and when it materialises
• 2016 - a year of surprises for the real estate sector with Brexit, the US election and Budget tax changes particularly topical
• Phenomenal activity in all occupier markets on the back of strong job creation numbers and favourable demographics
• Very strong rental growth achieved in all sectors of the Irish market
• Investment & hotel spend surprised on the upside
• 2017 - A combination of seismic events has muddied the waters, to the extent that the trajectory of the Irish real estate sector remains somewhat uncertain
• Ireland is expected to see economic growth of at least 3.5% being achieved this year compared to 2% in the US and 1.6% in the UK
• Further easing in total returns from Irish commercial real estate in 2017 with income supporting growth in the absence of yield compression
Despite reports to the contrary, Dublin has more than enough office stock in the pipeline to cater for any additional demand from Brexit relocations.
Dublin office market extends to > 3.7million m2 (40m sq.ft.) of which > 60% is located in the city centre.
Annual average take-up is approx. 172,000m2 pa (1.85m sq. ft.) & the overall vacancy rate is now in the region of 7.6% which compares well with other competing cities.
As at end Q3 2016, when buildings that are reserved are excluded, there is almost 285,000m2 (1.65 times annual average take-up) of office accom. available to let in the capital, contradicting the view that there is no office stock available.
In addition to the vacant stock, there is 372,637m2 (4m sq. ft.) currently under construction in the city centre in 29 individual schemes of which 22% is currently reserved.
This equates to just over 2 years supply & will add approx. 10% of office stock to the market.
19% of the >372,637m2 is due for completion in 2016 with a further 56% due for completion in 2017.
16% of the stock that is under construction & due for completion in 2017 has already been pre-let.
A further 80,000m2 of new office stock is under construction in the suburbs.
In addition 433,159m2 (4.6m sq. ft.) across 38 individual city centre schemes has a grant of planning permission & could also be commenced if required.
While a further 73,473m2 (790,569 sq. ft.) of city centre stock has applied for planning permission.
In summary, the visibility on potential delivery should give comfort to potential occupiers that Dublin is more than capable of providing sufficient high quality office accommodation if /as required.
Government must now ensure that there is sufficient housing & adequate infrastructure to facilitate this additional demand, if and when it materialises.