Irish property spending is expected to exceed € 4 billion by year-end
With € 2.7 billion invested in Irish commercial real estate in the first half of 2021 and an additional € 1.3 billion likely to be spent by the end of the year, today’s publication of the latest The CBRE agent’s bimonthly report finds that the overall market trajectory is positive despite the disparity in performance between different sectors during the Covid-19 pandemic.
Regarding the performance of the office sector following the easing of travel restrictions, CBRE notes that the activity has significantly increased compared to the take-up volume recorded in the first half of 2021. And while the increase in l impact of the Delta variant of the coronavirus has delayed plans for some occupants, CBRE says it expects employers to bring their staff back to the scene in increasing numbers over the next few months, with most leaning towards greater hybrid working model form.
Another result of the pandemic has been the growth in demand for flexible space solutions, with many occupants seeing a greater role for flexible offices in their portfolios.
Indeed, Chinese social media giant TikTok recently entered into a service desk agreement for 2,300 offices in a number of WeWork centers while it waits for its new headquarters at the Sorting Office in Dublin’s South Docks to be ready to be busy.
In terms of traditional office leasing, the market has recently signed a number of notable signatures, including BNP Paribas bank and US medical device giant ResMed Inc. 18; DLA Piper agreement for 2,787 m² (30,000 square feet) at 40 Molesworth Street, Dublin 2; HSE’s decision to take 928 m² (9,988 square feet) at Hawthorn House, Millennium Park in Naas, Co Kildare: ABB’s agreement for 619 m² (6,663 square feet) at the Concourse Building in Sandyford, Dublin 18 ; and the 557 square meters (5,995 square feet) occupied by Freenow at 7-12 Baggot Court, Dublin 2.
While the tourism sector has suffered an unprecedented blow from the Covid-19, the outlook for the sector is reflected positively in the 190 million euros in hotel sales made over the past year and the 200 million euros in off-market businesses currently under negotiation. Looking to the future, CBRE says many of the hotel opportunities expected to hit the market in the weeks and months to come are development projects rather than business assets.
Industrial and logistics
The strength of the industrial and logistics sector continued to show throughout the summer, with relentless demand from both occupants and investors. In addition to the many outstanding space requirements, CBRE was recently commissioned by Maersk Logistics to acquire between 13,935 m² and 18,580 m² (150,000 to 200,000 square feet) of housing in the Dublin market. This should be followed shortly by a second requirement between 55,740 m² and 74,320 m² (600,000 to 800,000 square feet).
While consumers have yet to regain their pre-pandemic buying behaviors, CBRE says the improvements that have taken place to date in footfall, consumer confidence and retail spending have seen an improvement. corresponding investor interest which should be reflected in the transactions concluded in the coming months.
The report says retail occupants have been drawn to the increased availability of space on some of the streets and projects they want to settle in and the ability to negotiate favorable terms in the aftermath of the pandemic.
The report notes that a number of stores vacated in the past 18 months have since been re-let to new occupants, Debenhams being one example. Several of its former Irish units have been acquired or leased in recent months with an agreement reached to acquire its former Limerick store for around € 9 million; The range is slated to open in their old store at Manor West Shopping Center in Tralee, County Kerry; Penney’s (Primark) is to begin operations at their old store in Tallaght, south Dublin; and Frasers Group is to open its first Irish stores in the former Debenhams stores at Mahon Point in Cork and Whitewater Shopping Center in Newbridge, Co Kildare.
CBRE says it expects further consolidation in the grocery and food and beverage sectors over the coming months with good demand from domestic occupants in particular.
Multifamily / PRS
While the private rental sector continues to perform well with up to € 1.5 billion in transactions completed in the first half of this year, an increasing share of those sales are made through targeted off-market campaigns.
Considerable due diligence is being undertaken to support these investment decisions, according to CBRE, as in addition to other regulatory changes introduced in recent months, investors must also consider recent government proposals to tie residential rents inflation, as opposed to the previous regime of capping rent growth at 4% in designated rental pressure areas.
CBRE estimates that the expiration of the Accelerated Strategic Housing Development (SHD) planning process at the end of this year will result in a noticeable increase in the number of residential planning applications in the coming months.
Referring to the recent downturn in the building land market, CBRE believes this can be attributed to the difficulty of pricing non-consented sites in the absence of details on future social and affordable allocation requirements and the many others. proposed policy changes in the housing project.
In this regard, the report states: “It remains to be seen what all the different proposals of the ‘Housing for All’ plan will have for the market, although it will take some time for any of the policy changes to increase significantly. the provision of housing. , which is at the heart of the current housing crisis.
“It will take a considerable time before there is a significant increase in the supply of housing, especially if the majority of projects are denied planning or repeatedly appealed in accordance with recent experience. This in turn will put continued upward pressure on house prices and rental values for the foreseeable future. “
The most notable trend observed in the health sector in recent months is an increased appetite for development projects. Many operators who aspire to increase the number of beds for their retirement homes in the Irish market find that they will need to get involved in the development of new facilities in addition to the acquisition of existing properties if they are to reach the scale.
But while the outlook for the Irish commercial real estate market as a whole is positive at the moment, there are risks to be aware of and avoid according to the company’s chief researcher, Marie Hunt.
She said: “September hopefully marks a new start for the Irish economy and all sectors of the Irish property market. Likewise, we now need to draw a line in the sand and ensure policy coherence to allow to investors, lenders and developers on whom we rely to provide a much needed supply of buildings, including public and private housing of all types and tenures, to be delivered without fear of further regulatory changes or government intervention ”.