01. Juli 2010 
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Signs of recovery evident in some sectors of the Irish commercial property market
The Dublin office of CB Richard Ellis Group today launched their latest bi-monthly assessment of conditions in the Irish commercial property market. The July 2010 report confirms that many sectors of the Irish commercial property market are now showing signs of improvement, following the biggest downturn ever experienced in the property market.
Report Highlights
- Improving levels of activity in the Dublin office market, with a number of lettings being negotiated and a growing number of requirements for accommodation being activated
- Prime office rents stabilising but retail and industrial rents continuing to come under downward pressure
- Yields for prime high street retail investments have improved quarter-on-quarter from 6.5% to 6.25%
- Approximately €100 million was invested in the Irish property investment market in the first half of 2010 – more than twice the level of investment in the whole year in 2009
- Irish investors net sellers of real estate in the UK where the strong rally of the last 10 months is showing some signs of easing
Marie Hunt, Director of Research at CB Richard Ellis who compiled the report said, “Although the decline in property values in the most recent cycle was more severe than ever experienced in any other previous cycle (primarily as it was caused by an unforeseen liquidity crisis and the withdrawal of foreign credit to Irish banks), we have to remember that this is a ‘cycle’ and based on what we are now seeing on the ground in the Irish commercial property market, it is one which we are slowly starting to emerge from”.
According to the new report, there has been an encouraging improvement in activity in the Dublin office market in recent months. In fact, when data has been compiled, take-up in the Irish capital over the last three months is likely to be higher than the almost 25,000m2 of lettings agreed in the city in Q1 2010. CB Richard Ellis say that prime rents in Dublin city centre are holding steady at approximately €376 per square metre or €35 per square foot although the agents say that downward pressures remain for secondary accommodation, particularly around the M50 where there is a large concentration of vacant accommodation. Despite a significant decline in the number of new schemes coming on stream, CB Richard Ellis say that the existing overhang of office space will be slow to erode until more net absorption is achieved.
Guy Hollis, Managing Director at CB Richard Ellis said, “In the same way that international investors are focused on finding prime investment opportunities in Ireland, in the occupier markets, we are seeing demand from a range of international occupiers to locate in the Irish market. This is primarily fuelled by the attractive rate of corporation tax prevailing here but has also been helped in recent months by the fact that rents and wage costs have declined significantly and enhanced our competitiveness. The fact that the unemployment rate is relatively high at 12.9% is also viewed as a positive by many potential occupiers on the basis that there is a greater labour pool available than was previously the case.”
CB Richard Ellis says that the ability to make quick decisions can make the difference between potential tenants choosing one office building over another in the current climate. Occupiers remain extremely cost-conscious; are focussed on turnkey solutions and are showing a preference for fully fitted accommodation. In addition, occupiers are focussing attention on the all-in costs of occupation, including service charges and rates as opposed to just rents, with finance directors having significantly more input into the decision-making process than heretofore.
With regard to the retail sector, the property consultants say that there has been a modest improvement in underlying consumer spending trends in recent months, fuelled by the emergence of more positive economic forecasts and the recent spate of good weather. At this juncture, with the summer sales season in full swing, CB Richard Ellis say that retailers are more upbeat than they were only six months ago but caution that the next six months will continue to be challenging and getting transactions across the line is likely to remain difficult. Prime rental values in the retail sector continue to come under downward pressure.
Report Highlights
- Improving levels of activity in the Dublin office market, with a number of lettings being negotiated and a growing number of requirements for accommodation being activated
- Prime office rents stabilising but retail and industrial rents continuing to come under downward pressure
- Yields for prime high street retail investments have improved quarter-on-quarter from 6.5% to 6.25%
- Approximately €100 million was invested in the Irish property investment market in the first half of 2010 – more than twice the level of investment in the whole year in 2009
- Irish investors net sellers of real estate in the UK where the strong rally of the last 10 months is showing some signs of easing
Marie Hunt, Director of Research at CB Richard Ellis who compiled the report said, “Although the decline in property values in the most recent cycle was more severe than ever experienced in any other previous cycle (primarily as it was caused by an unforeseen liquidity crisis and the withdrawal of foreign credit to Irish banks), we have to remember that this is a ‘cycle’ and based on what we are now seeing on the ground in the Irish commercial property market, it is one which we are slowly starting to emerge from”.
According to the new report, there has been an encouraging improvement in activity in the Dublin office market in recent months. In fact, when data has been compiled, take-up in the Irish capital over the last three months is likely to be higher than the almost 25,000m2 of lettings agreed in the city in Q1 2010. CB Richard Ellis say that prime rents in Dublin city centre are holding steady at approximately €376 per square metre or €35 per square foot although the agents say that downward pressures remain for secondary accommodation, particularly around the M50 where there is a large concentration of vacant accommodation. Despite a significant decline in the number of new schemes coming on stream, CB Richard Ellis say that the existing overhang of office space will be slow to erode until more net absorption is achieved.
Guy Hollis, Managing Director at CB Richard Ellis said, “In the same way that international investors are focused on finding prime investment opportunities in Ireland, in the occupier markets, we are seeing demand from a range of international occupiers to locate in the Irish market. This is primarily fuelled by the attractive rate of corporation tax prevailing here but has also been helped in recent months by the fact that rents and wage costs have declined significantly and enhanced our competitiveness. The fact that the unemployment rate is relatively high at 12.9% is also viewed as a positive by many potential occupiers on the basis that there is a greater labour pool available than was previously the case.”
CB Richard Ellis says that the ability to make quick decisions can make the difference between potential tenants choosing one office building over another in the current climate. Occupiers remain extremely cost-conscious; are focussed on turnkey solutions and are showing a preference for fully fitted accommodation. In addition, occupiers are focussing attention on the all-in costs of occupation, including service charges and rates as opposed to just rents, with finance directors having significantly more input into the decision-making process than heretofore.
With regard to the retail sector, the property consultants say that there has been a modest improvement in underlying consumer spending trends in recent months, fuelled by the emergence of more positive economic forecasts and the recent spate of good weather. At this juncture, with the summer sales season in full swing, CB Richard Ellis say that retailers are more upbeat than they were only six months ago but caution that the next six months will continue to be challenging and getting transactions across the line is likely to remain difficult. Prime rental values in the retail sector continue to come under downward pressure.
