Commercial property bounces back as restrictions lift

CBRE report says ‘phenomenally busy’ September and October have stabilised market

The Irish commercial property market has been “phenomenally busy” in the past two months, with the ability of investors and occupiers to travel to undertake property inspections having had a “transformative effect” on it, according to a new report.

Commercial property specialist CBRE today published their final bimonthly report for 2021 on Monday, which provides an overview of trends and transactions in all sectors of Ireland's commercial property market as the year begins to draw to a close.

According to the property consultant, the ability of investors and occupiers to travel to undertake property inspections since restrictions were lifted in the summer has been “transformative” for the market.

The market has “stabilised” and there has been a “significant” increase in transactional activity under way in all sectors, both on and off market, since the summer, with the volume of activity in the second half of 2021 in marked contrast to the first half.

In fact, the third quarter of the year was stronger than the two previous quarters combined in most sectors of the market.

September and October were “phenomenally busy”, although CBRE expressed frustration “that negotiations are proving overly protracted in many sectors with transactions taking several months to complete in some cases”.

It claimed therefore that the extent of activity under way was “not fully appreciated” due to the length of time it was taking to translate into completed transactions.

‘Robust recovery’

CBRE head of research Marie Hunt said: "The Irish economy is now firmly in the midst of a robust recovery with a very strong 2022 in prospect, despite current concerns about energy costs, inflation, and supply chain delays, all of which will hopefully alleviate in time.

“A recovering economy bodes well for the Irish commercial property market, which is now firmly in growth mode, having achieved a positive annual total return of 2.6 per cent in the year to the end of September, according to the latest MSCI Irish Property Index.

“For now, the focus is firmly on translating the many transactions that are in various stages of legals into completed deals and bringing the second half of what has been a year of two distinct halves for the commercial property market to a strong close.”

The third quarter saw a resurgence in activity in the office market, with take-up in Dublin in the quarter reaching close to 40,000sq m – almost double the volume of leasing activity achieved in the first two quarters of the year combined.

As an increasing proportion of office workers return to the office, occupiers are “testing new ways of working, and this in turn is fuelling demand for flexible leasing solutions”, the report noted.

Prime office rents in Dublin have now “firmly stabilised”, with the next movement likely to be upwards. The gap between rents for prime and secondary buildings is continuing to increase, however.

‘Remarkable result’

A total of 12 hotel sales totalling more than €330 million were completed during the first nine months of 2021 – more than double the volume of hotel sales completed in the entire year in 2020.

While wholly dependent on the sales that close this side of Christmas, the outturn for 2021 is likely to be more than €400 million.

There have been “robust volumes” of activity in the retail property sector of late as potential occupiers conduct site visits and inspect available premises searching for the optimal store best suited to their specific requirements.

In recent months, several potential new entrants have conducted site visits intending to open their first Irish stores, which will see new brands “emerging in due course”, the report said.

A total of €793 million was invested in Irish real estate in the third quarter, bringing total investment spend in the first nine months of the year to €3.48 billion. CBRE said this suggested the outturn for 2021 would comfortably exceed €4.5 billion – a “remarkable result”.