Improvement in transaction volumes expected in the commercial property market in 2011
18th January 2011 | The Dublin office of CB Richard Ellis Group (“CBRE”), the international commercial real estate firm, today launched their long-established annual commercial property outlook report. Within the Outlook 2011 report, the property consultants make a number of key predictions for the Irish commercial property market over the next 12 months. While the outcome for the commercial property sector is largely dependent on the direction the wider economy takes over the course of the next 12 months, CB Richard Ellis say that 2011 should see the commercial property market emerge from the most significant and unprecedented crash it has ever experienced.
- A notable improvement in transaction volumes is expected in many sectors of the Irish commercial property market in 2011 as NAMA, banks and borrowers start to unwind their positions and bring properties to the market.
- 29 investment transactions totaling €241.7 million were transacted in the Irish market in 2010, a marked improvement on the €92 million generated from 13 investment sales in the previous year. Transaction volumes are expected to increase further in 2011 with the bulk of demand for prime investment properties emanating from overseas investors.
- No rental growth is anticipated in any sector of the commercial property market in 2011 with rents and values, other than for prime buildings in key locations, expected to experience further declines over the course of the year.
- 187 office lettings totaling 130,000 square metres were completed in the Dublin office market last year which was a very encouraging level of take-up.
- Take-up in the key occupier markets (office, industrial and retail) is expected to hold up well this year with demand primarily driven by cost conscious occupiers taking advantage of the competitive environment and attractive deals on offer, as was the case in 2010.
- The most active occupiers in the office sector are expected to be high-end software companies, pharmaceutical companies and the online gaming industry.
- High levels of vacancy in the office sector will start to be eroded from 2011 onwards, particularly as the development pipeline has now been firmly curtailed. However, further rationalisation in the banking sector and the public sector could dampen this effect by adding more stock to vacancy.
- Although many high-profile retailers continue to go into administration, there is an encouraging level of demand for retail properties, particularly in prime locations. The outlook for prime shopping centres in key locations and prime high streets is considerably better than secondary retail properties, particularly those in provincial locations.
- A more significant proportion of retail revenues will be generated online from 2011 onwards as retailers increasingly move to multi-channel selling.
- Transactions that feature an element of turnover-related performance will become increasingly commonplace in the retail property market, particularly in the fashion sector. Shorter leases and frequent break clauses will become more prevalent as will the phenomenon of temporary or ‘pop-up’ shops.
- A gradual improvement in Revpar (revenue per room) is forecast for the Dublin hotel sector in 2011. However, outside of the larger cities, the hotel industry is expected to have another challenging year and further rationalisation is expected to occur.
- Active asset management is likely to be the most topical issue in the commercial property market in 2011 as developers and property owners strive to mitigate risks, maintain existing income streams and generate new income generating opportunities.
Marie Hunt, Executive Director at CB Richard Ellis, Ireland, who compiled the report said, “While conditions remain challenging in the commercial property market, the outlook for 2011 is somewhat better than it was only 12 months ago with a notable improvement in transaction volumes anticipated in many sectors this year. However, other than the top tier of prime properties, demand remains weak and for that reason, rental values and yields are expected to weaken further over the course of the year, creating a clear divide between prime and secondary assets”.
Guy Hollis, Managing Director at CB Richard Ellis, Ireland said, “The outlook for the commercial property market is uncertain. However, following the IMF/ECB intervention and the publication of the Government’s 4 year strategy, there is now some certainty in relation to the level of austerity that our economy faces over the coming years. This I believe will force us to adjust to the new reality and move on to the next stage of the property market cycle over the course of the next 12 months.”
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About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at cbre.com.
In Ireland, with offices in Dublin and Belfast, CB Richard Ellis is the country’s largest commercial real estate services company, now employing over 130 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, project management, consultancy, valuations and research. CB Richard Ellis Ireland has been listed among the top 50 Best Workplaces in Ireland, 2010, for the sixth year running. Please visit our website at cbre.ie or cbre.ie/ni