Which sectors of the market will be most active next year?
As witnessed in 2018, we expect the private rented (PRS) and build-to-rent sectors to continue to grow in 2019. The fundamentals of the domestic economy – employment and GDP – support investment in these area, particularly in larger towns and cities.
We also expect the office market to continue to perform on an even keel, with steady take-up and stable rents and investment yields in the respective markets and submarkets. Pre-lets and forward funding will continue to be a factor of the market.
The industrial and logistics sector is likely to see more speculative development to support increasing demand, culminating in stronger rents and further yield compression. We also anticipate further growth in the research and development sector.
Have rents and yields peaked across the various asset classes?
Based on our experience dealing with buyers over the last quarter of 2018, many feel there is now little value-add opportunities in the market, particularly within Dublin.
Market experience in some recent high-profile asset sales may suggest a slight adjustment to guide prices is required in Dublin, and it is up to our industry to advise our clients accordingly. This would stimulate investor interest, deepen the potential buyer pool, and generate competitive bidding. Property investments will generally find their level, if priced appropriately.
Where are the best investment opportunities at this stage?
This depends on the investor. Besides PRS we see good growth potential in the industrial market in the short to medium term. Prime city offices will offer steady long-term income and competitive yields to institutional investors. Non-institutional investors will look to Georgian and smaller-scale office product.
We also feel that there is further growth potential in Dublin 8, as well as well-located suburban office product. Outside the big four cities, there is a governmental mandate to regenerate locations such as Waterford, Sligo, Carlow, Kilkenny and Wicklow. These locations require purpose-built accommodation for international occupiers.
One thing to watch out for in 2019?
There is increasing discussion about retail and the effects of online. However, we anticipate that retailers will adapt to changing consumer needs, such as enhanced in-store experience and click-and-collect facilities. At this point the negativity is mainly stemming from the UK, but we are still seeing demand from household names for well-located city fringe and neighbourhood locations.
Conor Whelan is managing partner with QRE