The coming year will be a “busy, but different, year” for the Irish property market, according to CBRE Ireland’s 2017 Outlook report.
Enda Luddy, managing director at CBRE Ireland, said: “While the Brexit result will be mostly negative for the Irish economy and lead to GDP forecasts being downgraded, one sectors that will potentially benefit is the commercial property sector, if anticipated Brexit-related relocations from London materialise as we expect they will in 2017.”
Investment
• Some 223 investment transactions of greater than €1m (£868,000) completed in the Irish market during 2016, totalling more than €4.5bn. A number of trophy transactions took place, including the sale of Blanchardstown Town Centre and Liffey Valley shopping centres in west Dublin. Half of investment spending last year comprised retail investments.
• CBRE expects to see continued demand for Irish real estate from core buyers throughout 2017 amid a scarcity of prime product. Forward-funding of new development is forecast to become more prevalent.
• Total returns, rental growth and investment spending volumes are all expected to be lower in 2017 than last year.
• New Irish REITs will be emerging in 2017.
• Prime yields are expected to remain stable this year but CBRE expects to see some upward pressure on secondary yields over the next 12 months.
Hotels
• In 2016, 66 hotel sales concluded in the Irish market valued at €805m in total. This marks the third consecutive year in which more than 60 hotel transactions completed in the Irish market in the calendar year.
• Some slowdown in transactional activity is expected in the hotel sector in 2017 following two record years.
• Some Dublin hoteliers may decide to capitalise on the demand for hotels in the capital and bring hotels to the market in advance of new supply coming onstream from 2017 onwards.
• An increase in forward-funding transactions is expected in the hotel sector this year.
Dublin pubs
• Last year 30 Dublin pubs were sold in 2016, totalling more than €43m. This was a lower volume of pub sales than anticipated as improved trading conditions made some vendors reluctant to sell.
• The average Dublin pub price in 2016 was €1.44m and this is expected to rise further this year.
• Up to 40 pubs are expected to change hands in Dublin in 2017.
• Limited supply in the city centre is expected to drive demand for suburban pubs over the next 12 months.
Offices
• Office take-up of more than 2.6m sq ft was achieved in Dublin in 2016 in 264 individual transactions, 147 of which were to Irish companies, while 58 were to US companies and 33 were to UK companies.
• Prime office rents in Dublin are expected to reach the peak of the current cycle in 2017.
• The first meaningful improvement in new office supply in more than five years will take place this year.
• Almost 2.42m sq ft of new office stock is due for completion in Dublin in 2017, of which 25% has already been prelet.
• Any deterioration in office demand from the US in 2017 should be offset by an increase in Brexit relocation activity from the UK.
Industrial and logistics
• Industrial take-up of almost 3.12m sq ft was achieved in Dublin in 2016 in 183 individual transactions. This is a third less than the record take-up achieved in this sector in 2015, and the result of a shortage of modern accommodation.
• Prime rents rose by 25% last year and there is potential for prime industrial rents to rise by another 14% in 2017.
• An increase in speculative development is expected in 2017.
• There will be considerable demand from distribution and logistics operators, and data centres in particular.
Retail
• Potential for further rental growth on high streets, shopping centres and retail schemes in 2017 owing to strong competition, but rental inflation will slow.
• More entrants to the Irish retail market are expected this year following a large number of entrants last year.
• An increase in planning activity in this sector in 2017 is expected, with retail development commencing also.
Development land
• In 2016, 109 development land sales were completed, totalling almost €795m.
• Transactional activity in 2017 likely to be broadly similar to that of the past few years in the absence of any large land banks being offered.
• CBRE expects to see some semi-state organisations offering sites over the course of the next 12 months.
• A meaningful improvement in residential delivery from this year onwards is expected following a range of housing market interventions in 2016.
• Rising demand for sites for PRS and student accommodation will dominate in 2017.
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