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Published in Commercial Property on 15/01/2019

Irish Commercial Property Market on Course for Another Strong Year


CNI Editor reports

CBRE today released their OUTLOOK 2019 annual report containing their predictions for each sector of the property market in the year ahead. The property consultants say that with occupier activity remaining healthy across all sectors and strong investor appetite continuing to prevail, the likelihood is that another strong year is in prospect for the Irish commercial property market in 2019 despite the various clouds on the horizon globally.

Speaking at the launch of the 30th edition of their annual Outlook report at the RDS, this morning, Myles Clarke, Managing Director at CBRE Ireland said, 2018 proved to be another very strong year in terms of performance in the Irish commercial property market, both from an occupier and investment perspective. The market remained very attractive to long term investors and pension funds, keen to secure access to stable income streams. From my perspective, the extent to which Build-to-Rent increased as a proportion of overall investment spend in Ireland in 2018 was particularly remarkable. Build-to-Rent is now becoming a mainstream investment sector in its own right, with an ability to help alleviate some of the well-documented pressures in the Irish housing market”.

Meanwhile, in commenting on expectations for the Irish commercial property market in 2019, Marie Hunt, Executive Director & Head of Research at CBRE said “Although there is likely to be some further moderation in the pace of growth, the Irish commercial property market remains broadly stable. However, it must be acknowledged that we are now another year deeper into the cycle and there are an increasing number of clouds on the horizon, not least Brexit, which has the potential to dent confidence and impact negatively on Irish economic performance. As the cycle matures further, the search for secure, stable long-term income will escalate. Investors will increasingly seek to deploy into sectors that have capacity to generate stable long-term income, something that is in Ireland’s favour. The fact that investment opportunities in Ireland are attractively priced relative to other European locations at this juncture also bodes well. The issues that are likely to be particularly topical in the Irish commercial property market this year are competitiveness, flexibility, affordability, viability and deliverability.


  • As the new year begins, the Irish investment market is in a healthy state. It may be approaching the late stage of cycle, but the Irish investment market still offers considerable opportunity. There is a good breadth of institutional demand and a strong volume of investors looking to deploy capital. The occupier story in sectors such as offices, industrial, hotels and Build-to-Rent remains compelling and pricing for Irish investment assets remains attractive compared to other locations across Europe. As Brexit continues to loom large, CBRE expect to see more European funds (including some more French investors) looking to invest in stable markets such as Ireland. The property consultants also expect to see some further Asian capital investing in the Irish market in 2019 and possibly some new Singaporean buyers emerging.
  • From an investment perspective, the office market is likely to be the busiest sector in 2019 with good visibility on various assets that are due to come to the market over the course of the next 12 months.
  • It is difficult to generalise across sectors, but CBRE believe that there is still potential for some yield compression in various sectors of the Irish market, most notably prime offices, prime Build-to-Rent, hotels and industrial. This is at odds with many other locations in Europe where yield compression is unlikely at this point in the cycle. In line with trends across Europe, CBRE anticipate less appetite for retail investment opportunities. Investors will remain acquisitive throughout 2019 but with a focus on prime retail assets. The thinner pool of buyers for secondary retail assets could impact liquidity and therefore lead to yield softening for some retail assets over the course of this year.
  • In addition to demand for core office opportunities, ‘Sheds’ and ‘Beds’ appear to be sectors that will be keenly sought after in the Irish market in 2019. The industrial & logistics sector looks particularly attractive at this juncture with multi-let product very institutionally acceptable. As distribution channels evolve to service the growth of e-commerce and streamline supply chains in anticipation of Brexit, this is driving demand for industrial investment opportunities.


  • 2018 was the second consecutive year where the Dublin office market achieved record performance, boosted by several strategic transactions, predominantly from the expansion of occupiers in the technology sector. While the long-term sustainability of office demand is never certain, considering the volume of outstanding requirements for office accommodation in Dublin at this juncture, there is every likelihood that it could be ‘three in a row’ in 2019, with office take-up in the Irish capital on course for another strong performance and supply expected to remain tight.
  • Despite the number of cranes on the horizon, many of the schemes being delivered have been partially or fully pre-let in advance of practical completion. As a result, there are very few office buildings ready for immediate occupation although this in turn is benefiting flexible office providers.
  • One of the more noticeable trends in the office market over recent years has been the extent to which the phenomenon of flexible working has taken hold, with up to 12% of Dublin office take-up in 2018 comprising flexible operators. This is a trend which is only going to become more apparent throughout 2019 as co-working and flexible solutions teeter on the verge of becoming mainstream.
  • One of the key trends for 2019 will be the extent to which office leasing activity spills over into new and emerging districts of the capital, boosting areas such as Dublin 8 and easing pressures on the traditional core CBD.


  • While prime headline office rents in the Dublin office market are expected to remain unchanged at approximately €700 per square metre in 2019, there is potential for rental growth in some locations including the North Docklands. CBRE also expect to see good rental growth being achieved in the suburbs of Dublin and in provincial markets over the course of the next 12 months.
  • Considering the extent to which office demand in Ireland is driven by multinational activity, there is a need to be mindful of global factors that have potential to impact on demand going forward. Aside from trade wars and political factors, issues such as the introduction of an EU-wide digital tax could have implications for office demand in the Irish market going forward. However, the most pressing issue at this juncture is continued investment in infrastructure and in particular affordable housing to ensure that office workers can continue to be attracted to and accommodated in our cities.

Industrial & Logistics

·       During the last 12 months, prime headline industrial rents rose by 6.5% to the point where new development became economically viable in most instances.  As a result, we saw an escalation in planning activity and speculative development commencing along the M1 and N2 around Dublin Airport, as well as along the N3 and N7 corridors. Encouragingly, a number of these new speculative units have been let prior to practical completion, such is the pent-up demand for modern facilities in prime locations.

·       Demand in the industrial & logistics sector this year is expected to primarily emanate from companies involved in E-commerce, logistics, pharmaceuticals and food manufacturing while CBRE also expect to see continued strong appetite for zoned land for data centre use in 2019.  Brexit-related demand is expected to increase as companies attempt to streamline and adapt their supply chains, with some UK-based E-commerce occupiers expected to take a physical presence in Ireland for the first time this year.  The extent to which Brexit drives demand will ultimately depend on whether a hard or soft outcome materialises, but the logistics sector in Ireland is set to witness increased activity in either scenario.

·       Across Europe, demand has been increasing for final mile delivery solutions around major conurbations. This is now materialising in Dublin and likely to occur in Cork, Limerick and Galway, aligned with the steady growth in online sales activity. Indeed, Dublin City Council are currently trialing a final mile delivery concept. While demand is predominately focussed on large modern purpose-built logistics facilities close to major road networks, final mile/urban logistics can be accommodated in older buildings with lower clear internal heights, which could provide opportunities to reposition some older stock in the capital in due course. However, in some cases, these properties are now likely to be highly sought after for redevelopment for higher value uses. 

·       There was an increase in the volume of industrial and logistics investment transactions completed in the Irish market in 2018. Sourcing core investment opportunities remains challenging but with new stock now being developed and let, this will create investible product in due course.

·       Headline rental rates for best-in-class buildings are expected to increase from €106 per m2 (€9.85 per sq. ft.) to reach approximately €113 per m2 or €10.50 per sq. ft. by year end 2019 – an uplift of 6.5%.


  • Millennials are spending more disposable income on experiences rather than possessions and routine purchases are increasingly moving online, so retailers must adapt in reaction to this trend. Having physical stores and an online presence that complement each other is essential, especially now that more than 11% of retail sales activity in Ireland is occurring online and growing at a rapid pace. Retailers need to adapt, differentiate and offer superior consumer experience to survive and thrive in this omnichannel environment.
  • In the medium term, CBRE believe that the two sectors most insulated from structural change in consumer behaviour are large experiential retail schemes with an emphasis on food & beverage, living, entertainment and a modern leisure offering and convenient local assets. The challenge for retailers is to make retail schemes more experiential and more defensive against changes in consumer preferences whilst at the same time having the most efficient and complementary omnichannel offering.
  • CBRE expect to see continued growth and demand this year from sectors including health & beauty, homewares, service providers, food & beverage and convenience occupiers.
  • It is envisaged that department stores will need to be repositioned as the life cycle of this model evolves. In some cases, this will give rise to asset enhancement opportunities, enabling schemes to offer more suitable floor plates and creating points of difference for schemes that need to evolve.
  • Most of the retail supply to come on stream in Ireland in 2019 will comprise extensions to, and refurbishments of, existing schemes. Of the retail schemes that currently have planning permission, it remains to be seen which ones will go on site first or indeed if revised planning permissions will be sought in some instances.
  • Running shopping centres and retail parks is getting more management intensive. It is clear that where good asset managers are employed and keep reconfiguring and reinvesting in the asset, there is potential for value preservation and rental growth. However, from an investment perspective, CBRE expect to see a widening gap between the performance of prime and secondary retail in 2019 as yields for secondary retail slip due to a thinner pool of potential investors.
  • CBRE expect to see in the order of 3-4% rental growth for prime shopping centre and prime high street assets. However, increases will be limited to prime assets, with rental growth for the most part remaining elusive in this particular sector in 2019.


Development Land

·       The volume of land traded in Ireland during 2018 was considerably higher than anticipated at approximately €1.5 billion – the highest volume of transactional activity in a decade with new records set in terms of the prices achieved in some instances. In addition to the sale of some sizeable strategic land banks in the Dublin market over the last 12 months, there was an encouraging volume of activity in the development land market in the regions during 2018 also. Development continued at pace throughout the capital and to a lesser extent in regional cities, as genuine efforts were made to deliver supply to match underlying volumes of demand in sectors such as the office market, the industrial & logistics market, hotels, student accommodation and residential.

·       As 2019 commences, there is still a very strong volume of capital to be deployed into the development land sector, which is encouraging. Appetite for sites capable of accommodating Build-to-Rent, student accommodation, co-living and senior living concepts is particularly strong. However, with fewer portfolio transactions likely from this point forward, the overall volume of activity is likely to be lower in 2019 than in the year just gone.

·       The establishment last year of the Government’s Land Development Agency is welcome but it remains to be seen to what extent this new entity will unlock land for development in the short to medium term. Other welcome changes during 2019 include changes to the planning code in relation to apartment development and the introduction of Guidelines in relation to Urban Development and Building Heights, which gave more clarity to developers and in some cases will improve the viability of proposed schemes.

·       We see price stabilisation occurring in residential land prices in 2019 following the strong growth witnessed in the last number of years, particularly considering the extent to which house price inflation has eased in the Irish market over the last 12 months. The big focus for 2019 will be on securing planning permission, the provision of services & infrastructure and ultimately commencing development on the many sites traded during 2017/2018 with a view to increasing the delivery of much-needed supply in as timely a fashion as possible.

·       One of the remarkable trends witnessed last year was the extent to which Build-to-Rent became established as a mainstream investment sector in its own right with more than €1.1 billion invested in this sector in 2018. Indeed, investment in this sector was only compromised by a shortage of investible stock such was the volume of capital looking to deploy. Interestingly, an increasing proportion of investors seeking to invest in the Build-to-Rent sector are now willing to look beyond core and are focussing attention on good suburban locations on key transport nodes where viability and affordability are considerably better

·       We expect to see prime yields for Build-to-Rent trending keener than 4% during 2019 with premiums likely to be payable for portfolio deals such is the weight of capital seeking scale.

·       2019 looks certain to be a busy one in the development sector of the market. The consistent themes in this sector this year are likely to be ‘affordability’ and ‘viability’, as concerns about cost price inflation and rising labour costs will only escalate further as the economy heads towards full employment.


  • From an investment perspective, there were several notable investment transactions concluded in Cork during 2018 and CBRE are confident that this momentum will continue in 2019, particularly considering the pricing differential that exists between assets in Dublin and those in Cork.
  • A wider pool of investors is now willing to look at opportunities in Cork including several European institutional investors. We could see more new entrants in 2019 in addition to some of the existing investors deploying more capital in the region. Rather than being city-specific, we believe that investors will be asset-specific in their regional investment focus this year. As new buildings are developed and leased up, this will create some much-needed investment-grade stock. We may also see some Cork retail assets that were previously traded as part of portfolio sales being sold during 2019.
  • There was some yield compression experienced in the Cork market during 2018 and we expect to see prime yields in the office and industrial sectors sharpening by between 25 and 50 basis points again in 2019.
  • We expect to see some further job announcements for Cork during 2019, which bodes well for the new office stock that is coming on stream in the city. This, in turn, will fuel demand for additional housing and in particular for a high-end rental offering in the city. However, unless there is some intervention to improve the viability of developing much-needed apartments in the city centre, the likelihood is that housing provision will continue to be heavily skewed towards traditional low/medium density housing in the suburbs of the city.



  • Overall transaction volumes in the Irish hotel market reached more than €731 million during 2018, which was up considerably on the previous year. However, transaction volumes were boosted by the completion of some forward fund transactions and large portfolio transactions during the year with the volume of single asset hotel sales in 2018 lower than had been anticipated. No significant single asset hotels traded in Dublin city centre during 2018.
  • The volume of hotel sales in Ireland in 2019 is expected to be broadly similar to last year, albeit with limited portfolio transactions. In addition to steady activity in the provincial markets, we expect to see some high-profile Dublin hotels being offered for sale over the next 12 months. Strong pricing is likely to be achieved for city centre assets in particular, considering the growing international buyer pool targeting opportunities in this market.
  • Having seen some new entrants to the Irish hotel market in 2018, we expect this trend to continue this year. We may also see more Asian interest in any Dublin city centre assets that are offered for sale this year. Meanwhile, we will also see some Irish hotel groups further expanding their operations in 2019, focussing in particular on good provincial assets that come to the market.
  • Over the last number of years, there has been a notable increase in institutional interest in the hotel sector with a widening range of buyer types seeking to invest. Demand for sale and leaseback transactions is very much in evidence in the Irish market and is expected to maintain positive pressure on hotel yields and pricing over the coming 12 months.


  • Dublin saw some welcome new supply coming on stream during the last 12 months and despite delays affecting several projects, the number of hotel rooms that opened for business in the capital during 2018 reached close to 1,300. The delivery timelines of several projects slipped due to planning and funding issues and as a result, some of last years’ anticipated supply will now come on stream in 2019. Despite the volume of new hotel projects under construction, demand continues to outstrip supply in the Dublin market. Indeed, the supply situation is likely to become even more acute over the next 12 months if the Government proceed with plans to clamp down on the Airbnb sector as anticipated.
  • CBRE believe that approximately 1,500-1,700 hotel bedrooms will complete in the Dublin market this year while development will continue, and in some cases commence, on new hotel projects in other regional cities such as Cork and Galway. Despite the number of hotel projects currently in the planning process, new stock is coming on stream at a relatively slow pace, hampered by planning and funding delays to some degree but increasingly also impacted by construction capacity in the wider economy.
  • It is becoming increasingly difficult to secure city centre sites for hotel projects because of demand for alternative uses and the values being paid for these uses. For this reason, CBRE expect to see more hotels being incorporated as part of mixed-use developments as opposed to standalone hotel projects over the next few years.
  • Overall, CBRE expect to see a steady increase in hotel values in 2019 – broadly in line with the increases experienced last year. Trading conditions are expected to remain strong again in 2019, due to healthy tourism numbers, an increase in corporate activity and a strong dollar. Dublin city centre and Airport locations are likely to fare best in 2019. The property consultants also remain confident about trading performance in Cork, Galway, Kilkenny and Killarney. There is likely to be some stabilisation of performance measures including ADR and RevPAR as a result of the increase in VAT in last year’s Budget from 9% to 13.5%. However, the VAT increase is likely to impact on provincial hotel properties to a greater degree than in the Dublin market, where in most cases it will be absorbed. Similarly, any downturn in business as a result of Brexit, is expected to impact provincial hotels more significantly than those in the capital. 


Dublin Pubs

·       CBRE expect to see up to 30 Dublin pubs coming to the market over the course of the next 12 months with properties being sold by private treaty for the most part.  In addition to some city centre premises, a number of well-known suburban pubs are due to be formally launched for sale in the capital during 2019. As was the case last year, we expect to see several pubs changing hands for alternative uses this year. In many cases, the value for alternative use will be considerably higher than the existing use as licensed premises.