Demand outgrows supply for commercial property

Demand outgrows supply for commercial property

There is now a lack of prime commercial properties for sale in the Irish market to cater for the current volume of demand in many sectors, according to consultants, CBRE today.

The CBRE report also contrasts conflicting market conditions in the Republic and Northern Ireland, with transaction volumes extremely low in the North during the first few months of 2013 in contrast to two consecutive quarters of strong transaction volumes in the Republic and improving prices in the Dublin market over recent months.

Looking at the office and industrial sectors, the report said that there has been an increase in demand for office premises in both the city centre and the suburbs of Dublin over recent months with overall demand for 192,000m2 of office accommodation currently outstanding. However, many recently activated office requirements are relatively small in size with many extending to less than 500m2. There are some larger office requirements but these are mainly long-term projects.

It said that, on the basis that many buildings are currently trading at less than replacement cost, a number of office and industrial occupiers are purchasing buildings as opposed to leasing them.

The fact that the Grade A office vacancy rate in the prime Dublin 2/4 Central Business District is now as low as 6.2pc is causing some concern. However, despite the emerging scarcity of Grade A accommodation and the fact that prime office rents are now showing signs of improvement, CBRE believe that it will be some time yet before speculative development proves feasible in the Dublin market.

The report said that there is currently a very notable disconnect between activity in the retail sector of the Irish economy and the retail property market. The Central Statistics Office (CSO) recently confirmed that retail sales in Ireland fell by 1.9pc on a monthly basis to the end of March while retail sales declined 1.6pc on an annual basis. However, this is at odds with continued activity in the retail property market with several bidders emerging for many of the prime properties that have come to the market around the country in recent months.

Vacancy rates on many high streets around the country increased in the last six month period but CBRE expect them to fall again in the medium term as new tenants emerge for many of the vacant units.

According to Enda Luddy, Managing Director at CBRE, Ireland “The last few months has seen continued activity in all sectors of the Irish commercial property market although demand is strongest for prime properties in Dublin, with a clear divergence in performance and transaction volumes between prime and secondary assets. A theme that is coming through from many sectors of the market, particularly investment, hotels and development land, is the lack of prime property being released for sale to satisfy the current volume of demand. This trend is also evident in the Northern Ireland market. Although the Northern Ireland property market remains depressed relative to the Republic, there is international demand for prime investment properties in the North but there are very few assets actually being offered for sale, which is frustrating would-be purchasers”.

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