©upthebanner, 2013 used under license from shutterstock.comECONOMIC OUTLOOK
Ireland’s economy continues to recover despite pressure and instability across Europe. GDP continues to perform steadily with a second consecutive year of growth in 2012 (+0.9%)(CSO). Forecasts show further improvements in 2013 (1.2%) and 2014 (2.5%) (Central Bank). However, the recovery remains two-tiered. The export sector continues to drive economic growth but domestic demand continues to struggle in comparison. The economy is impacted by a high, albeit steady, unemployment rate of 14.0% (CSO), and weak consumer sentiment which continues to decline. There is no inflationary pressure.
INVESTMENT MARKET
Q1 has sustained the significant uplift in activity from the second half of 2012 with a total investment volume of €342 million. This is significantly higher than the €17 mln recorded in Q1 2012. Prime Dublin city center offices are the focus for the majority of investors, driven by an expectation of rental growth in the short-to-medium term. Pricing has been competitive, with values achieved exceeding vendors’ expectations. We are aware of over €6 bln of capital available for investment, with strong interest mainly coming from overseas. There is limited quality product on the market but we anticipate the supply of loan and direct asset sales to increase through the remainder of 2013.
©ShutterstockOFFICE MARKET
The office market is performing strongly with a take-up of 500,000 ft² (approx. 46,450 m²) in Q1 2013 compared to 280,000 ft² (approx. 26,012 m²) in Q1 2012. Demand remains focused on spaces under 10,000 ft² with only a few deals per year exceeding 50,000 ft². Occupiers continue to target prime buildings in prime locations (e.g. Dublin 2). The technology sector continues to drive activity and has dominated take-up for the last 24 months. Vacancy remains high at 18.9%, which equates to over 7.5 million ft² (approx. 696,750 m²) of vacant space. Supply in certain locations is tighter, particularly for prime quality stock and for certain size categories. Prime headline rents in the city center have increased this quarter to €28–€32 per ft².
RETAIL MARKET
There are mixed messages from the retail sector with further store closures and examinerships matched by news of new entrants and existing retailers actively looking for space. Nevertheless, the underlying sentiment is mostly negative, and is impacted by weak consumer sentiment, low rents and values, short-term lettings and high levels of vacancy in some schemes. Prime high streets and larger shopping centers are performing most steadily, particularly in Dublin, but provincial high streets and medium-sized schemes are struggling in comparison. Retail warehouse parks continue to suffer with limited demand for key schemes and no demand for secondary.
INDUSTRIAL/LOGISTICS MARKET
The industrial market performed strongly in Q1 2013 with take-up (600,000 ft²) almost double the level recorded in Q1 2012. Demand remains focused on smaller-sized product, with 60% of deals under 10,000 ft². Anything greater than 50,000 ft² is considered large in the Dublin market, which records less than 10 transactions of this size per year. A key issue is the high level of older stock, some of which can be classed as unlettable in its current condition. Demand by corporate occupiers is focused on prime quality, larger-sized product. Prime rents remain unchanged for the last six consecutive quarters and are now stable at €5.50 per ft² although there is further pressure on secondary product (€3.00 - €4.00 per ft²)
©Bannon, Burlington HotelHOTEL MARKET
Since 2008, hotel development activity has ceased, with no new hotels opening in 2012. Hotel trading performance was also impacted, with provincial hotel markets outside of Dublin, Cork and Galway city center remaining very challenging. The hotel investment market has performed more steadily, with significant levels of transactions in 2012. Volumes totaled approximately €205 mln and investor demand is likely to remain strong. Prime Dublin hotels will continue to be of interest to international investors, with domestic demand likely to focus on smaller provincial hotels at heavily discounted levels. A new 180-bedroom hotel in the Grand Canal Square in Dublin’s Docklands is currently the only hotel in the pipeline for 2013.
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