Brexit to drive increased demand for office space

Brexit-related inquiries are likely to increase current “strong volumes” of demand in the Dublin office market, according to the latest report from commercial real estate services firm CBRE.

In its bimonthly report CBRE said Brexit-related inquiries were “likely to solidify further” over the coming months as the UK’s position started to become a little clearer, “adding another welcome layer of demand if this materialises”.

The last two months has seen “continued momentum” in each of the occupier sectors of the Irish commercial property market, with “particularly strong volumes of activity” in the office and industrial and logistics sectors.

Total investment spend during the first quarter “surprised on the upside”, with almost €930 million of transactions recorded in the three-month period, more than a quarter of which occurred outside of Dublin.

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The retail sector of the economy “continued to perform solidly”, buoyed by continued job-creation, with employment in Ireland having increased consecutively in each of the last 22 months.

Development remained “well controlled”, which in turn was helping to support rental values in all sectors, with the industrial sector continuing to boast the highest year-on-year rental growth prospects.

Core opportunities

Demand for commercial real estate “continues to outstrip supply”, with particularly strong demand for alternative investment and core opportunities in provincial locations such as Cork.

“Sourcing core product continues to prove challenging, with an increasing proportion of transactions now being conducted off-market,” according to the report.

The number of hotel sales completed in the opening months of the year “masks underlying volumes of off-market activity”. Appetite “remains strong”, with particularly strong demand from US buyers notable at present.

Dublin is set to be the biggest beneficiary of strong tourist activity as demand for hotel rooms continues to outstrip supply in the capital.

Revenue per available room the city increased by 9.8 per cent in the year to March 2018, according to Hotstats, while occupancy in the capital was up 2.1 per cent year-on-year.

CBRE suggests that approximately 1,300 additional hotel rooms are due for delivery in Dublin during 2018.

In the development sector, a number of “attractive assets” have been launched in recent weeks.

Development land

Some 37 development land transactions totalling more than €167 million were completed in the Irish market during the first quarter of 2018. This compares to 28 transactions totalling approximately €104 million completed in the same quarter last year.

“Despite pent-up demand for development land in the current market, very little of scale is being traded, which is frustrating for the many end-users looking to acquire prime sites at present,” the report said.

The recently revised design standards for apartment development have been “broadly welcomed” in the industry.

“Coupled with a welcome increase in the volume of planning permissions being granted under the Strategic Housing Development fast-track process, these initiatives should improve momentum in the delivery of much-needed residential development in the medium term,” said CBRE. However, the “one disappointment” is the absence of clarity on height.