Property outlook 2019: Interest to turn to secondary urban areas
‘The market to watch in 2019-2020 is undoubtedly the logistics’
Galway during SeaFest: the city, along with Cork and Limerick will see strong occupier demand and prime office space in these locations will do well. Photograph: Jason Clarke
Which sectors of the market will be most active next year?
2019 looks set to be another strong year across many of the markets. All indicators suggest that some €20 billion will be invested across all asset types in the coming year. The office market looks set to dominate, with more than 350,000sq m of office space occupied in our four main markets in 2018. This level of activity will continue into 2019. The private rental sector (PRS) will undoubtedly continue to expand and attract significant capital.
Have rents and yields peaked across the various asset classes?
There is no doubt that prime markets have enjoyed an incredible run in terms of rents and yields in recent years, with prime locations now stabilised and future growth is likely to be more moderate. That said, there is now a notable broadening of both occupier and investor appetite to secondary and suburban locations in Dublin and regional Ireland, where there is likely to be further improvement in yield and rental growth in 2019.
Where are the best investment opportunities at this stage?
We are arguably experiencing the biggest accommodation crisis Ireland has ever endured. High-quality, best-in-class rentals in prime locations will be a valuable asset in the years ahead, and investors who enter earlier in the development cycle of PRS will secure strong returns, given the demand for product.
The regional cities of Cork, Galway and Limerick will also see strong occupier demand, and prime office space in these locations will do well. Arguably the arbitrage between best-in-class office yields in Dublin and regional cities, currently at between 150 to 250 base points, should contract.
One thing to watch out for in 2019?
The market to watch in 2019-2020 is undoubtedly logistics. Every indicator in the UK, Europe and beyond suggests that after decades of being the forgotten one, this market is about to soar. In many ways the changes in retail create opportunities for the logistics sector.
At this point one cannot talk about the outlook without referring to Brexit. The best-laid plans can come unstuck by events outside of our control. The decisions made in relation to Britain’s relationship to its Europeans neighbours will have a long-standing impact on the Irish economy and therefore our property market.
Aidan Gavin is managing director of Cushman & Wakefield