‘Busy’ first half for commercial property sector

Fiona Reddan

Ireland’s commercial property market experienced a “very busy” first half to the year, with demand strong across most sectors, although Brexit uncertainty will carry over into the autumn.

According to Marie Hunt, executive director and head of research at CBRE Ireland, transactional activity in many sectors of the market is expected to be down quarter-on-quarter in the second quarter, with several transactions that for whatever reason didn't complete by June 30th, having now fallen into the third quarter.

“The second half of the year is therefore likely to account for the lion’s share of transactional activity in many sectors of the Irish commercial property market in 2019.,” she said, adding that while Brexit uncertainty is to continue into the autumn, “the Irish economic backdrop remains solid, buoyed by continued strong job creation, which in turn bodes well for the commercial property market”.

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With the outlook for interest rates to the downside, Ms Hunt said that this “bodes well” for continued investment.

“The very substantial differential between 10-year bonds and real estate yields, which combined with economic, demographic and occupational factors makes a very compelling investment case for Irish real estate”.

With the exception of the retail sector, CBRE say that prime yields in the Irish market remain stable at the mid-year point, and, in some cases, have potential to harden further during the second half of the year.

Despite some much-publicised closures in the retail sector, including the imminent closure of TopShop on St. Stephen’s Green, the report finds “robust” demand for retail premises, although less reliant on the fashion sector with growth in the health and wellbeing, beauty and leisure sectors. And, while yields are softening, this has unearthed several new opportunistic bidders who are specifically seeking higher-yielding retail investment opportunities, particularly those that offer stable income streams, the report finds.

In offices, demand remains “elevated, while on the build-to-rent front, the report points to considerable off-market activity underway, mostly forward-commit structures, with forward funding set to become a feature of the Irish market in the second half of 2019.

However, Ms Hunt cautioned that developers hoping to build for the build-to-rent market need to make sure that schemes are not only viable, but also specifically tailored to the local demographic and contain the correct mix of amenities for that catchment area and target market.

Demand for modern industrial buildings in strategic locations around the M50 and its main arterial routes continues unabated, led for the most part by requirements from the logistics, ecommerce, data centre and food and beverage sector.

In development land, CBRE expects an increase in the volume of land sales by religious orders in the second half of 2019, while in hotels, demand is likely to increase further as a result of new reforms to regulate short-term tourism-type lettings, which came into effect on July 1st.