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Published in Commercial Property on 06/09/2019

Cork City Development Sells for €35M

#KennedyWison

CNI Editor reports

Cork’s property market gathered significant momentum this year and this looks set to continue.

The latest deal is expected to see O’Callaghan Properties sell its Half Moon Street mixed use development in the heart of Cork City Centre for more than the €34m which had been guided by joint agents CBRE and Savills. It is generating gross annual income of more than €2.6 million.

Situated on Lavitts Quay, the building extends to 119,589 sq ft of retail and Grade A offices.

A preferred bidder has also been selected for the Park Avenue portfolio of 62 apartments on South Douglas Road along with three commercial units. All but nine of the apartments are vacant as is one of the commercial units.

They are expected to sell for more than the €17.5m which had been guided by CBRE’s Brian Edwards.

A recent report from CBRE says that negotiations are ongoing on several Cork deals, including office lettings and land sales. It also cites the recently announced sale of 31 acres in the South Docklands to O’Callaghan Properties for €47.5 million. This is expected to be a long-term project with a mix of uses including offices and apartments.

Meanwhile Margaret Kelleher of Lisney estimates Cork’s investment market saw €150m of turnover recorded in the second quarter of this year or almost 12.5pc of the national market.

About €24m of investment spend in Cork formed part of two larger PRS portfolios which also included properties in other cities. They included IRES Reit’s purchase of apartments at Harty’s Quay, Cork City as part of a €285m deal with Marathon Asset Management which included Dublin units.

Cork’s retail investment market was also active this year. Irish fund IPUT bought Mahon Point Retail Park for a reported €56m. and a Davy fund bought Blackstone’s CastleWest Shopping Centre in Ballincollig for about €18m.

The office sector saw €27m spent on three different deals. The largest of these was the sale for a reported €21m of five units in Cork Airport Business Park to a joint venture comprised of UK property group Henley and Irish developer Bartra Capital. The price suggests a net initial yield of 7.7pc.

“The outlook for the second half of 2019 is promising with over €140m worth of deals on the market, some of which is already sale agreed,” Ms Kelleher says.

Meanwhile Cushman and Wakefield report that Cork’s office market was also busy.

“Take up levels posted strong returns as new completions aid occupier expansion, while development activity continues to further enhance the docklands area. Robust levels of demand led to take up reaching 22,050 sq m at the end of quarter two, suggesting Cork is on course to surpass the long run market average for a second consecutive year and for just the fourth time in the past decade,” says Cushman director Peter O’Flynn.

Office availability declined to 47,950 sq m. and the vacancy rate to 7.9pc. similar to vacancy levels last seen during the boom.

About 51,050 sq m of new offices were under construction at the end of June with the lion’s share located in the city centre.

“The majority of this space is due to completed in 2020 and will provide much welcomed Grade A space to the city centre,” Mr O’Flynn adds.

Meanwhile Brian Edwards, says prime rents and yields in Cork remain stable. Prime high street retail (Zone A) rents average €2,150 per sq m and yields average 6pc. Prime office rents at €350 per sq m and yields at 5.5pc are tending stronger. Prime industrials are also trending stronger with rents at €91.50 per sq m and yields at 6.5pc.

Concerns about the availability of apartment accommodation in Cork were raised this week in a report commissioned by Cork Chamber and the Construction Industry Federation (CIF) and produced by EY-DKM Economic Advisory. It warned that the cost of construction of new apartments is significantly beyond viability and is threatening future economic growth in Ireland’s cities.

Using cost appraisals for four different apartment schemes by national developers, the report found that the projected sales price of a new two-bed apartment in Cork city ranges from €389,000 to €486,000,

Those prices are way above selling prices. For instance a survey by the Institute of Professional Auctioneers and Valuers shows that average prices for two bedroom apartments in Cork City in the second half of last year were €193,750 while those in the county averaged €125,000. Daft’s June 2019 report shows the average asking price for a one bedroom apartment in the second quarter of this year was €130,000 – an increase of 7.7pc compared to the same quarter of 2018.

Nevertheless, after a long lull in apartment development activity, developers appear to be forging ahead with residential projects. Last week HQ Developments Ltd, a joint venture between BAM Ireland and the Clarendon Group, submitted a planning application for a mixed-use development at Horgan’s Quay, with 302 apartments, retail and restaurant units. On the south side of the river, the Scally family are backing plans for Railway Gardens, a scheme of 118 apartments units in a development with a 17 storey tower on Cork’s South Link Road.

Meanwhile JCD Group is expected to apply for a 25 storey purpose-built Build-to-Rent scheme on Albert Quay in the city in the coming weeks by.

REF: Irish Times