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Published in Commercial Property on 02/03/2021

Continued Lockdown Delaying Commercial Property Resurgence


CNI Editor reports

Commercial property specialists CBRE Ireland have released their first bimonthly report for 2021, commenting on trends and transactions in all sectors of Ireland’s commercial property market.  With Ireland in full lockdown for the months of January and February and likely to remain so for some time yet, the property agents say that the resurgence in activity that was expected in many sectors of the market in 2021 has clearly now been delayed. However, CBRE says that the market remains calm with a palpable sense of expectation of a better second half to the year once the Government’s national vaccination programme has been completed and travel bans lifted.

According to CBRE, following on from a trend witnessed in 2020, there is particularly strong appetite for industrial and logistics property at present, both from an occupier and investment perspective, with demand boosted by the disruption, delays and bureaucracy caused by Brexit since the beginning of the year. Demand for multifamily investments also continues at pace with several sizeable transactions completed and gone to legals in the opening months of the year. Meanwhile, the healthcare sector remains very active, with the largest nursing home transaction ever completed in the Irish market, completing in recent weeks.  There has also been signs of increased activity in the development land, retail and hotels sectors and CBRE say that we can expect to see some transactions being announced in all of these sectors over the coming months.

According to Marie Hunt, Head of Research at CBRE Ireland, “As we approach the first anniversary of Ireland going into full lockdown, it would appear that we have a few more months to go before the economy can fully reopen. However, the property market is hopeful that an end is finally in sight and that a busier second half to 2021 is now in prospect. Pricing has been relatively consistent over recent months and investor demand for Irish property remains strong, which is very encouraging. Although transactional activity in some sectors of the commercial property market remains largely stymied for now, other sectors continue to perform well regardless, with evidence of off-market activity and preparatory work underway for campaigns that will launch in the coming months”.


  • Multifamily is one sector of the Irish investment market that isn’t as adversely impacted as others at present, in that transactional activity can continue largely unaffected despite the limitations of lockdown, being that much of the product that is trading comprises forward commitments as opposed to standing stock trades. Although some launches have been delayed until such time as lockdown and travel restrictions ease, there is still considerable activity underway in this sector, buoyed by a fundamental shortage of supply of purpose-built rental product in cities such as Dublin.
  • Investors across Europe continued to be attracted to the stability of the multifamily market despite limited rental growth prospects in the short term. Ireland is the only European country where this sector accounted for the largest proportion of investment spend in 2020, with €1.75 billion invested in multifamily investments in Ireland last year, accounting for 48% of total spend. By comparison, £3.5 billion was invested in multifamily in the UK in 2020, up 30% year-on-year.
  • The vast majority of multifamily trades in the UK market are forward funding transactions whereas in the Irish market, most transactions comprise forward commits, with very little standing stock available to purchase. There is Asian interest in multifamily product in the UK whereas most of the capital investing in multifamily in the Irish market is European. Another notable difference between both markets is the fact that many trades in the UK comprise a combination of housing and apartments whereas most trades in Ireland comprise apartments. Prime yields in Ireland have been trending keener as a result of the weight of capital targetting the sector with prime yields for standing stock now in the order of 3.6% and yields for forward commit transactions stable at approximately 3.75%.


  • While Government wage supports and other stimuli have supported the sector to some degree, the reality is that until such time as the nationwide vaccination programme has been advanced, lockdown eased and international travel permitted, conditions in the hotel sector will remain compromised. It is not a question of ‘if’ the hotel sector will recover, but rather ‘when’ it will recover. The market will clearly rebound in time, but the speed of this recovery is totally dependent on the timing of vaccine rollout and lifting of travel restrictions.
  • As was the case last year, provincial hotels (particularly those in coastal locations) are likely to benefit most from an increase in domestic ‘staycation’ business in 2021 whereas cities such as Dublin, which are more dependent on international travel, will take longer to recover.
  • Encouragingly, since the fourth quarter of 2020, and supported by pricing discounts of 15% to 20% from some vendors, there has been a discernible increase in activity from a transactional perspective. Where sellers are realistic on pricing, there are opportunities to negotiate deals. Negotiations are well underway on several hotel assets, which should see a number of hotel transactions completing over the coming months. Once there is transparency on pricing, CBRE expect to see more momentum in the market – mirroring a trend last witnessed in 2012/2013.
  • Alternative deal structures are expected to become increasingly evident in the hotel sector. In addition to an increase in sale and leaseback transactions, which will prove popular considering that they enable hotel owners to release capital and focus on their core business, we expect to see increased incidence of vendor financing, deferred payments, lease purchase arrangements and ground lease transactions in this sector over the coming months.


  • Brexit has long been a factor influencing location decisions in the industrial sector of the market. This has accelerated since the beginning of this year with disrupted supply chains and increased bureaucracy in recent weeks encouraging occupiers to review their supply chains and consider establishing or increasing existing in-country storage and distribution. This has put additional pressure on a market that is essentially starved of modern supply, leading to an increase in pre-letting of new accommodation that is at various stages of the planning or construction process.
  • In addition to overseas retailers looking to locate more of their storage and distribution in-country, as more UK retailers opt to close physical stores in the Irish market, CBRE expect to see some of these entities leasing logistics units to facilitate online delivery in Ireland. There has been much discussion in recent weeks about Ireland’s first pure play online retailer having pre-let a facility in Ireland last year with a view to becoming operational in the Irish market during 2021. CBRE expect that this will lead to some competing firms setting up Ecommerce operations here later this year.
  • Prime headline rents in the Dublin industrial market remain stable at €113 per square metre or €10.50 per square foot. A scarcity of new accommodation is forcing some occupiers to consider short-term lets until such time as new buildings can be delivered, either on a build-to-suit or speculative basis.  This in turn is putting upward pressure on rental values for secondary and provincial accommodation. There is a particular shortage of buildings extending to up to 3,000 square metres at present.
  • In addition to pent-up occupier demand, investor demand for industrial and logistics assets in the Irish market is also very strong at present with a number of transactions imminent. Prime yields have compressed by a further 25 basis points since the beginning of the year and currently stand at 4.5%.


  • The retail sector in Ireland remains largely paralysed, with all but essential stores permitted to open since the beginning of the year. Much retail spending continues to occur online, albeit with added disruption and delays since January in some cases as a result of Brexit. There has also been disruption to supply chains as a direct result, causing problems for some retailers that import a lot of goods from the UK. With a national vaccination programme now underway, retailers are hopeful of a phased reopening of stores over the coming months. 
  • Encouragingly, Ireland had the second highest savings rate of 29 countries in the OECD in 2020, with an additional €13 billion going on deposit last year, which CBRE says bodes well for a rebound in retail sales activity once stores eventually reopen.
  • Until the retail sector is back trading in a meaningful way, it will be difficult to gauge the full extent of the impact that Covid-19 has had on the high street and retail schemes throughout the country. The demise of many UK retailers and in particular Debenhams and the Arcadia Group has left a noticeable gap in the Irish market, leading to significantly increased vacancy in many schemes and retail locations. Without Government wage supports and arrangements between landlords and tenants, the reality is that many more retailers simply would not have survived the last 12 months.
  • CBRE expect to continue to see considerable regearing and restructuring of retail leases for the foreseeable future, particularly for those retailers in the fashion/footwear/apparel sectors. For the most part, regearing is taking the form of rent waivers or abatements in return for lease extensions and other concessions. Those renegotiating existing leases are, in many cases, being granted reductions of up to 20% of the previous rental level, whereas more substantial discounts are being achieved by those negotiating new lettings in certain locations. This is creating opportunities for those retailers that are in a position to commit to specific and strategic moves in the current climate. As more leases are signed in the retail sector over the coming months, this will recalibrate the tone of rental levels and offer greater transparency. Despite a move towards more turnover-related transactions across Europe during the last 12 months, there is still reluctance from some landlords to pursue this approach in the Irish market, and indeed from some tenants also.
  • Encouragingly, despite the fact that the inability to travel to inspect locations and opportunities continues to hamper transactional activity, there has been a notable increase in retailer demand for new stores in the first two months of 2021. There are a number of deals currently in legals that are due to be announced over the coming months, which will provide some much-needed positivity. Grocery and convenience retailers, who have generally traded well throughout Covid-19 lockdown, remain particularly active and continue to pursue ambitious rollout programmes throughout the country.


  • According to the MSCI Irish Index, commercial property in Ireland achieved a total return of -1.4% in 2020, while capital values in the Irish market declined by 6.1% in the year. This result masks considerable sectoral variance however, with retail sector values having declined more than any other sector during the 12-month period as a result of both rent and yield movements. Total returns in the retail sector declined by 14.8% and retail capital values declined 19.1% whereas a positive total return was achieved in the office (2.2%) and industrial (8.4%) sectors.
  • Demand for core assets in the Irish market has remained strong during the opening months of the year, albeit with the country still in the midst of a full lockdown and a stringent travel ban remaining in force, transactional activity continues to be hampered to some degree. Many sales processes that were due to commence in Q1 have been delayed albeit there is still considerable activity underway off-market, particularly in the multifamily sector.
  • Despite some uncertainty about the ‘future of the office’, which is unlikely to dissipate until such time as the majority of office workers return to their buildings later this year, the office sector remains the preferred investment choice for institutional investors in Europe with most institutional investors remaining focussed on securing core and core-plus opportunities in this sector.
  • Property that is deemed secondary, by virtue of its location, age or quality of building, length of income, strength of tenant covenant or ESG credentials could come under some pricing pressure and will certainly prove more difficult to fund for the foreseeable future.


  • Based on increased activity witnessed towards the end of last year and continued momentum in the opening months of 2021, CBRE anticipate a healthier volume of trading in this sector this year, with a number of sites being marketed at present, several deals in legals and some housing sites in the Greater Dublin Area currently being prepared for sale. The launch dates of some campaigns have however had to be pushed out until such time as bidders are in a position to travel to undertake inspections, meaning the second half of 2021 is likely to be considerably busier than the first in this sector.
  • Much activity is occurring off-market and this is likely to continue to be the trend in the development land sector for the foreseeable future, other than for trophy assets, which are more likely to be publicly marketed.


  • Following a stronger than expected level of transactions in the Irish healthcare market in 2020, activity in this sector has continued at pace in the opening months of this year. Indeed, the largest ever nursing home transaction ever completed in the Irish market – the sale of the Trinity Care group to Spanish investor DomusVi – completed in January. This trade included 3 assets in Dublin including the Rathborne Nursing Home development, which is nearing completion and 1 asset in each of the counties of Cavan, Kildare, Louth and Meath.
  • CBRE continue to see strong appetite for consolidation in the Irish healthcare sector from investors from different jurisdictions with French, Belgian, Dutch, German, Chinese and UK investors and operators all now active in Ireland’s healthcare market. The property consultants say that the likelihood is that we will see further new entrants to this niche sector over the course of 2021 with strong demand for good quality nursing homes and primary care centre opportunities. UK healthcare provider PHP recently said they have plans to invest up to €75 million in Ireland in the next 12 months and plan to double their existing Irish portfolio over the next 3 years.
  • While much of the focus in recent years has been on the acquisition of standing stock, we are beginning to see appetite from some buyers for sites with the benefit of planning permission for nursing home schemes, particularly in the Greater Dublin Area and to a lesser degree in Cork. An example is the recent sale of a site with planning permission for a 150-bed nursing home at Leopardstown Valley in south County Dublin to Mowlam Healthcare.


  • Activity in the Dublin office market has been more subdued than normal during January and February. Many organisations are understandably holding off making occupational decisions in the current climate, mirroring trends witnessed in 2020.
  • With the exception of a small number of large office requirements, which are progressing, albeit slowly, most activity in the market at present is being triggered by imminent lease events such as lease breaks and expiries. Some occupiers are opting to extend existing leases or move to flexible accommodation until such time as they are in a better position to gauge their future space requirements or until decisionmakers can physically inspect buildings. 
  • Vacancy in the capital has increased in the last 12 months, primarily as a result of an increase in ‘grey space’, which, in turn, is proving attractive to those occupiers looking for fitted accommodation that is ready for immediate occupation. 
  • Although leasing activity is currently constrained and most occupiers are not under pressure to make decisions, sentiment remains upbeat, with an expectation of a busier second half to the year once physical inspections can resume and organisations are clearer on their longer-term space requirements.
  • Prime headline office rents in Dublin currently stand at approximately €635 per square metre. As opposed to a dramatic decline in headline rental levels, this cycle has been characterised by more generous lease incentives such as longer rent-free periods and more flexible lease terms. Any companies that are in a position to sign leases in the current climate will be able to negotiate more favourable terms than are likely to be available later this year and into 2022.
  • With demand still trending close to the long-run average for the city, the expectation is that we will see a notable pick up in leasing activity in H2 2021, by which time most large employers are expected to have the vast majority of their staff back in their offices.