Commercial property specialists CBRE has released its OUTLOOK 2020 annual report containing predictions for each sector of the Irish property market in the year ahead. The property consultants say 2019 proved to be another strong year for the Irish commercial property market, both from an occupier and investor viewpoint with record investment volumes of over €7.2 billion recorded during the year and real estates’ attractiveness to investors increasing as a result of easing monetary policy.
In commenting on expectations for the Irish commercial property market in 2020, Marie Hunt, Executive Director & Head of Research at CBRE said: “As a new decade commences, there are a myriad of cyclical and structural risks that have potential to impact the performance of the property market, not only during the year ahead but over the next ten years. These include economic, environmental, geopolitical, societal and technological risks. The changing nature of cities, workplaces and technology will continue to influence how people ‘work, live and play’ and shape the direction of the market. In addition to lines blurring between alternative and traditional real estate sectors, we expect to see greater blurring of lines between individual market sectors from this point forward, with mixed uses within buildings and schemes becoming increasingly commonplace and greater focus on placemaking and the public realm in this new paradigm. While the issues of affordability and viability that dominated the agenda in 2019 have clearly not gone away, key themes in 2020 will include resilience, repurposing and sustainability.”
Industrial & Logistics
- CBRE is anticipating another busy year for the Irish industrial and logistics occupier market in 2020 following take-up of more than 330,000m2being achieved last year – the second highest volume of annual take-up achieved in the last decade. Demand is strong and could increase further once there is further clarity on the direction of Brexit. The property consultants expect the focus of both occupier and investment appetite this year will be along the N7 corridor and within proximity of Dublin Airport. Take-up activity in 2020 is likely to be dominated by logistics and to a lesser extent pharmaceutical uses and food manufacturing. Ecommerce will also continue to evolve with Ireland’s first pure play online retailers likely to set up operations in-country during the next 12 months. CBRE expect prime industrial rents to increase by as much as 5% during 2020.
- While established developers have numerous planning consents in place to develop new industrial stock in both North and South Dublin, there are no new 10,000m2facilities currently available for immediate occupation. CBRE say that it is encouraging that there will be some new supply coming on stream in due course to satisfy some of the requirements that are currently in the market in addition to some new mandates that are likely to materialise over the course of 2020.
- Although the number of land sales in 2020 is likely to be broadly similar to last year, the overall volume of transactional activity could be more muted due to stabilisation of land prices. The structure of land sales in 2020 is expected to be considerably different to last year however, with more forward-fund and forward-commit structures anticipated.
- Supply in the development land sector in 2020 is likely to be boosted by landowners looking for exit options on some of the land they have accumulated over recent years and in advance of more onerous vacant site taxes coming into force. Vendors will largely comprise private landowners and both public and private bodies seeking to maximize the value of landholdings and put their lands into production – or in the case of privates, trading sites that they don’t have capacity, or indeed funding, to deliver themselves in the short to medium term.
- The market will continue to underdeliver in terms of required housing units for the foreseeable future, which in turn will continue to fuel demand for new forms of living including multifamily and new hybrids of same including co-living and microliving. Planning policy will need to adapt to facilitate new ways of living. Meanwhile, CBRE expect to see increased focus on the height and density issue during 2020.
- Real estate will remain highly desired by investors, but investment returns are likely to continue to stabilise over the course of 2020 in line with an easing in global growth expectations. Investors will, in many cases, be looking to take more defensive positions at this particular point in the cycle, particularly those investors that have concerns about further Government interference in the sector.
- CBRE is expecting to see some high-profile investment trades occurring in the Irish market during this year but coming off such a record high of more than €7.2 billion in 2019, overall investment spend in the Irish market in 2020 is expected to be somewhat lower than last year.
- The office sector will continue to attract most interest in 2020 (having accounted for 51% of investment spend last year), with investors particularly encouraged by the strong occupier story and the ability to acquire new stock. Industrial investments will also be highly sought after by investors due to the sectors’ superior rental growth expectations, but a lack of scale will clearly limit opportunities in this sector of the market. Some investors will see retail as a buying opportunity where assets have been sensibly priced and offer repurposing or asset management angles.
- CBRE expect to see continued appetite from both Irish and European institutional funds for Irish real estate investment opportunities during 2020, encouraged by the scale of liquidity demonstrated last year. They also expect to see increased appetite from Asian investors this year albeit there is likely to be a shift in the nationality of Asian investors focussing attention on Ireland in 2020 with an increase in investors from Singapore and Hong Kong and a decline in appetite from Korean investors anticipated.
- Several overseas funds started to make their presence felt in the Irish healthcare sector last year, acquiring both individual properties and platforms using a myriad of different structures in order to access opportunities. CBRE expect to see other funds following suit in 2020.