Commercial Property Market Now Showing Signs Of Stabilisation
Extremely busy Autumn season in all sectors of the commercial property market
Dublin, November 1st 2012 – Property consultants CBRE today released their final bi-monthly report for 2012 commenting comprehensively on the latest trends and transactions in the occupier and investment sectors of the commercial property market in the Republic and in Northern Ireland.
According to the report, there has been an escalation in activity in the Irish commercial property sector over the last few months. According to Marie Hunt, Executive Director and Head of Research at CBRE “There has been much discussion about a stabilisation in the Irish housing market over the last few months. This trend is also being witnessed in the commercial property sector. Indeed, the last two months have seen a very significant increase in the volume of activity in all sectors of the Irish commercial property market. Transactional activity in all sectors has escalated over the course of the Autumn. If this continues, a busy 2013 is in prospect.”
-Total returns in the Irish commercial property market have been positive for four consecutive quarters now, according to IPD’s Irish Index, having increased by 4.8% in the last 12 month period.
-There has been a notable increase in the volume of investment properties being offered for sale during the traditional Autumn selling season, with a number of large lot sizes coming available for sale and attracting significant attention during September and October.
-In addition to the €271 million of commercial investments transacted in the Irish market during the first nine months of 2012, there is currently more than €700 million of investment property being formally marketed for sale or under offer.
-Some non-distressed assets are now being brought to the market, which suggests that property owners perceive this as a good time to sell considering the weight of capital chasing opportunities at present.
-Demand for prime office and retail properties is primarily emanating from overseas investors. Meanwhile, many of the smaller lot sizes, which are being offered for sale around the country, are mainly of interest to domestic purchasers, particularly those with cash.
-The volume of investment spend in the UK market during Q3 2012, at £11.9 billion, was up 40% on the previous quarter, proving that investors continue to seek out investment opportunities, particularly in the London market. Indeed, 73% of all investment transactions completed in the UK in the first 9 months of 2012 were London properties.
-Although Irish investors continue to dispose of assets in the UK market, many of the more high-profile trophy investment purchases of Irish investors have been traded over the last few years.
-Prime office rents have remained stable for three consecutive quarters now with some rental growth now anticipated in this sector during the first half of 2013.
-An increasing number of retailers are reporting a stabilisation in their trading patterns and some are reporting year-on-year increases in trade, which is encouraging.
-In the retail sector, demand is strongest for units on prime high streets and in good shopping centres, which is evident from the negligible void rates in these locations, albeit many of the transactions are short-term in nature and off significantly lower rents than prevailed previously.
-The volume of take-up achieved in the Dublin industrial sector in the first nine months of 2012 was the highest since 2008. Encouragingly, despite the economic backdrop, there is considerable appetite from corporate occupiers to acquire facilities in a range of locations around the country with companies in the food sector, logistics companies, distribution companies and 3PL’s (third party logistics) proving most active.
-A continued volume of lettings and sales to be achieved in the industrial sector up until year end with the significant number of large requirements remaining outstanding auguring well for this sector in 2013.
HOTELS & LICENSED MARKET
-Following the recent release of new data confirming that the volume of tourists visiting Ireland rose by 7.9% last year to 6.6 million visitors, the latest hotel performance numbers for Dublin are extremely positive. This will boost the already strong international interest for prime Irish hotel opportunities, particularly in the capital. According to STR, Dublin hotels achieved their highest occupancy rate in 9 years in September 2012.
-In addition to a continuing increase in the volume of development land being offered for sale around the country over the course of 2012, a new trend that has emerged over recent months is an escalation in the number of development properties and partially-complete housing schemes being released for sale.
-Cash buyers are particularly active for lot sizes of less than €3 million.
-While developers will not make the decision to commence development projects purely because development contributions may be reduced in some local authority areas, proposed reductions are nonetheless welcome and will certainly help to improve the financial viability of some development.
-Activity in the commercial property market in Northern Ireland continued at a slower pace than in the Republic and in the main UK regional markets over the last number of months.
-The total volume of office letting activity in Belfast during Q3 2012, at approximately 4,366m2 or 47,000 sq ft, equates to less than 14% of the volume of office take-up in Dublin in the corresponding period, demonstrating the extent to which the differential in corporate tax could be impacting on activity in the region.
-Activity in the investment sector in Northern Ireland remains muted with just one transaction signed in Q3 2012 - the purchase of a Tesco store in Limavady by CBRE Global Investors for over £6.2 million. This brought the total level of investment spend in the region over the first nine months of the year to over £68.48 million, which with the exception of one office transaction, comprised retail investments.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 110 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.