Prospects for the Irish Commercial Property Market in 2021 - Construction Network Ireland - Construction Network Ireland

Back to News

Next Article

Published in Commercial Property on 12/01/2021

Prospects for the Irish Commercial Property Market in 2021

CNI Editor reports

Commercial property specialists CBRE today released their OUTLOOK 2021 annual report containing their predictions for each sector of the Irish property market in the year ahead. The property consultants say that the legacy of 2020 will vary, and have different repercussions, for each sector and sub-sector of the property market. Some sectors that were negatively impacted by Covid-19 are likely to see a notable rebound in activity this year, particularly in the second half of the year once we are out of lockdown, a vaccine has been rolled out, most people have returned to their workplaces and the travel ban has been lifted. However, it may take several years for other sectors of the market to see a return to normalised levels of activity and trading.

Speaking at the virtual launch of the 32nd edition of their annual Outlook report, Myles Clarke, Managing Director at CBRE Ireland said, Covid-19 affirms our conviction that the capital allocated to real estate and to Ireland in particular will only increase. While real estate on the whole is not immune from market fluctuations, as an asset class it continues to offer relative stability of income and capital appreciation, which is attractive to investors.

In commenting on expectations for the Irish commercial property market in 2021, Marie Hunt, Executive Director & Head of Research at CBRE said “With the way that we buy, lease, use and occupy both residential and commercial real estate fundamentally changed as a result of a combination of structural trends and the outbreak of Covid-19, flexibility and adaptability will be as important as strategy in the year ahead. Events of the last 12 months will force many property owners to focus on reconfiguring, repositioning and future-proofing their real estate assets. We expect to see a focus on core assets in 2021 but we also expect to see some investors turning their attention to alternative investment sectors. We anticipate greater focus on life sciences, biotechnology, pharmaceutical and biomedical properties as well as continued appetite for prime office, logistics, healthcare and residential investment opportunities. Indeed, we believe that 2021 could see investors targetting ‘beds, sheds and meds’”.


  • According to CBRE Research, there was more than €3.6 billion invested in the Irish investment market during 2020 which is a strong result considering the market conditions. 48% of investment spend emanated from the residential sector with offices accounting for 36% of spend by comparison.
  • There is considerable international capital looking to deploy into markets that offer defensive, low risk characteristics, such as Ireland. CBRE are very encouraged by the volume of liquidity in the market, which bodes well for the domestic investment market in the year ahead despite the current backdrop.
  • 2021 will certainly be a busy year from a transactional perspective considering the volume of pent-up demand and the many investment sales campaigns that were put on hold as a result of the pandemic that will now be reignited. However, investment spend is likely to be heavily skewed towards the second half of 2021, by which time, investors should be able to freely travel to inspect buildings and conduct due diligence. By then, there will also be more clarity on occupational market trends, providing investors with more certainty on the security and sustainability of income over the medium to long-term.
  • Security of cashflow has become important from a pricing perspective, with investors increasingly specifically targetting opportunities that offer secure long-income potential.
  • CBRE expect to see more sale and leaseback transactions in 2021 as many companies look to release equity and reduce costs while securing continuity of their core business, following what has been a difficult year economically for many.
  • While the prospects for core property remain healthy, thinner demand for secondary product is likely to continue to impact on pricing over the course of the next 12 months.


  • According to CBRE Research, almost 160,000m2 of office leasing activity was recorded in Dublin in 2020, down 47% on the previous year.
  • CBRE expect to see a notable pickup in office leasing activity from the second half of 2021 onwards as economic activity improves and several postponed mandates are reignited, with demand likely to be primarily led by pharmaceutical companies and the technology sector. Unlike recent years, when take-up in the Dublin office market was significantly boosted by multiple large takes of accommodation, the property consultants expect to see fewer large transactions being signed during 2021. This will encourage some landlords to adopt a multi-let strategy in order to reduce vacancy in particular buildings and generate income as opposed to holding out for longer to secure a single occupier.
  • One of the lasting legacies of the global pandemic will be increased demand for flexibility, both in terms of the adaptability of office buildings themselves and increased flexibility in the leases agreed between landlords and tenants.
  • The occupational needs of companies will change as a result of the outbreak of Covid-19, and CBRE believe that while companies may not necessarily need less office accommodation, the way they use that accommodation will definitely change. This more distributed pattern of work will have implications for workforce management. The property consultants say that occupiers the world over will have to think seriously about the configuration of their office buildings, how efficiently accommodation is being used and how this might change in the future, with an increasing proportion of staff likely to work remotely, either from home or another ‘3rd place’, at least part of the time.
  • Prime headline rental levels in Dublin have eased since the onset of Covid but not dramatically so. While CBRE expect that there might be some further decline in headline rental levels during the first half of 2021, the main change will be in relation to lease terms.

Industrial & Logistics

  • According to CBRE Research, a strong 343,716m2 of industrial take-up was recorded in Dublin in 2020, up 3% on the previous year.
  • The industrial & logistics sector continued to flourish throughout 2020, with structural trends supporting both occupier and investor demand for industrial & logistics real estate. In fact, a combination of lockdown and Brexit-related uncertainty stimulated an increase in Ecommerce and data centre activity and necessitated the reconfiguration of supply chains, which in turn fuelled demand for facilities in this sector of the market.
  • Increased demand for modern buildings put additional pressure on a market that was already supply-starved, leading to vacancy rates reaching all-time-lows of below 2% during the last year. As a result, prime headline industrial rents reached €113 per square metre (€10.50 per sq. ft) by year-end. With demand expected to remain equally strong in 2021, CBRE believe that prime headline rents in the industrial sector are expected to increase to €116.80 or €10.85 per sq ft over the next 12 months.
  • Demand for reverse logistics is expected to increase in 2021. CBRE also expect to see demand for temperature-controlled warehouse space increasing as food exporters and importers move towards holding increased inventories in-country. The national Covid-19 vaccination rollout may also stimulate demand for additional cold-storage facilities in 2021.
  • As modern industrial & logistics product leases up, this will generate some additional opportunities to deploy into this specialist investment sector over the course of the next 12 months, with these opportunities expected to be very keenly bid. We may see some opportunities emerging by way of sale and leasebacks. CBRE also expect to see increased investor appetite for opportunities to invest in data centres and life sciences facilities, which are particularly highly sought after across Europe at present.
  • With Ireland’s first pure play online retailer having set up operations in-country during 2020, this may, in turn, lead to competing firms setting up Ecommerce operations here this year. We may also see some UK retailers leasing accommodation to support online businesses to replace physical stores that closed during 2020. 


  • The severe disruption to trade since the onset of Covid-19 highlighted structural trends that were already evident in the retail sector for some time and exposed fundamental weaknesses in the traditional retail business model.
  • CBRE believe that typical leasing arrangements in the retail sector are now likely to be more aligned to tenants’ ability to pay and their turnover, which is the norm in Europe. The property consultants believe that we will also see shorter lease lengths being sought and granted, with greater flexibility built into typical retail leases.
  • Most international retailers will open stores in a smaller number of locations from this point forward, to streamline their footprint of physical stores and rationalise their portfolios. Retailers will rule Ireland out if they cannot secure the flexible terms and conditions that are on offer in other competing jurisdictions.
  • The significant regearing and restructuring that has characterised the retail market over the last 12 months is likely to continue in 2021, meaning we are now firmly in a tenant’s market. A thinner pool of occupiers seeking to secure stores coupled with greater availability and flexibility means that rental values will have to rebase to new levels in order to prove attractive to retailers. The magnitude of rental decline in the Irish market is likely to be more aligned to rental falls experienced in mainland Europe as opposed to the very dramatic declines already witnessed and anticipated in the UK. There will clearly be an opportunity for retailers to do deals and secure stores in locations that they previously wouldn’t have been able to access, and we could see some new entrants to the Irish retail market as a result, including some more European retail brands.
  • While CBRE say that they are expecting a resurgence in activity in the retail sector in 2021, they are under no illusion that it will be a ‘return to normal’. Rather, the retail landscape will look considerably different from this point forward. The pandemic has tested traditional retail formats and facilitated the trialling of new concepts, some of which are likely to remain with us long after the pandemic is over.


  • An active year is anticipated in the Irish multifamily sector in 2021 with some new investors expected to deploy into this sector this year. There is considerable domestic and European institutional and annuity capital targetting both public and private sector opportunities with a huge diversity of capital sources focussing on this particular sector. The investment case for the Irish residential market was already compelling before Covid and is now even more so given how resilient the sector has proven to be. In the current environment, CBRE anticipate particularly strong demand for standing stock (specifically product that can clearly demonstrate stabilised rents) and stock that is nearing completion as opposed to stock that is in various stages of the planning process. While many trades in this sector this year will be in the form of forward commit sales, CBRE expect to see a small number of forward-funding transactions completing in 2021 also.
  • CBRE also expect to see more developers applying for planning permission and developing schemes in fringe locations that offer accessibility to good public transport, on the basis that affordability is better, and the renter pool is deeper in these locations. One of the legacies of last year’s lockdown is that many renters have come to the realisation that living immediately adjacent to their workplace is no longer critical, due to new working practices and the ability to work remotely for at least part of their working week. Some are opting to rent in more affordable locations in schemes with a high amenity offering for lifestyle reasons. CBRE therefore expect to see more ‘suburbanisation’ of the multifamily offering in Dublin, with some providers developing and acquiring schemes in locations that they would have disregarded previously.

Development Land

  • According to CBRE Research, there were 65 land sales completed in the Irish market during 2020, totalling more than €511 million between them, equating to less than half of the value of land sold in Ireland in the previous year. Approximately €200 million of the 2020 development land spend was accounted for by the Irish Glass Bottle disposal towards year-end.
  • CBRE expect to see a rebound in the office market and other occupational sectors during 2021, which will stimulate demand for commercial and mixed-use sites in due course. In the short-term, most developers are likely to reserve judgement until there is clear evidence of a resurgence in demand in these sectors and will instead focus their attention on residential-led opportunities.
  • CBRE expect to see some sizeable landbanks in the Greater Dublin Area being offered for sale during the year. Those building housing aimed at purchasers will focus attention on the commuter counties and the Midlands region while those focussing on other typologies such as multifamily will focus on more urban sites, particularly those on the fringes of the city with good public transport connectivity.


  • According to CBRE Research, there were only 10 hotel sales completed in the Irish market last year, totalling €167.3 million, equating to approximately one quarter of transactional activity in this sector in 2019.
  • Demand for Dublin hotels remains encouraging with particularly strong appetite for hotel development projects where the properties will not be completing until 2022 or later, demonstrating confidence in the medium-term prospects for the sector. The expectation is for improved trading conditions in 2021 but according to CBRE, the reality is that it will be a number of years before the hotel and tourism industry fully recovers from the disruption of 2020. Hotels will therefore be predominantly reliant on domestic business initially until such time as there is a meaningful improvement in overseas business and tourist activity.
  • The challenging conditions endured in 2020 and expectations for 2021 have had a negative impact on pricing in the hotel sector. Unlike the last downturn in the commercial property market, distress in this particular downturn is not as a result of the capital stack considering the high level of equity in Irish hotel ownership at this juncture. Instead, distress has emanated from an inability to trade and uncertainty about the length and severity of Government enforced lockdowns and travel bans.  CBRE believe that hotel values in the Irish market have declined by between 10% and 25% on average. This level of discount is certain to motivate some buyers in 2021, particularly those who believe in the potential for recovery of this sector in the medium term.
  • CBRE believe that the rollout of a vaccine should boost values in due course, but it is likely to take some time for hotel values to recover to pre-Covid levels, particularly when you consider that the ability to source debt funding is likely to be challenging for the foreseeable future.


  • There is very limited investment product of any significant scale available to trade in the Cork market and unlike previous downturns, investors are not under pressure to sell. Unlocking investment opportunities is therefore likely to remain challenging although we may see some off-market trades occurring in 2021. For the most part, international investors will need to see a recovery in the Dublin market before they will commit to deploying in regional locations.
  • There is an urgent need to provide services, roads and wastewater facilities to unlock sites and facilitate development in the Cork region. According to CBRE, Cork simply cannot fulfil its full potential if investment in vital infrastructure is not prioritised at a Government level. There are large tracts of development land in Ovens, Ballincollig, Blarney and Cork’s north suburbs that are incapable of development without investment in off-site infrastructural works.   
  • Changes to work practices and in particular, an increase in remote working, which occurred as a result of last year’s pandemic, bode well for regional cities and we expect to see an increase in occupier interest in locating some, or all, of their operations in cities other than Dublin. For this reason, we expect to see an increase in office leasing activity in Cork and other regional cities in 2021 and beyond. Brexit could also attract some new occupiers to regional markets in due course.


  • Transaction volumes in the healthcare sector were higher than had been anticipated in 2020 – a remarkable result considering the significant challenges faced by the sector during the year.  Occupancy in all nursing homes declined as a result of the onset of the pandemic with occupancy down between 10% and 30% in general. However, despite the impact on income generation, CBRE say that there has been no evidence of any deterioration in values or diminution in multiples for future-proofed, good quality nursing home stock.
  • The industry is unclear on what additional new regulations HIQA may introduce in reaction to Covid-19, in an effort to enhance infection control measures in the future. Contained ‘pods’ may, for example, become a trend for new nursing homes, which could have major implications for overall bed management and staff rostering, while considerable capital expenditure may be required to facilitate necessary reconfiguring. However, according to CBRE, the biggest issue facing this sector in 2021 will be the 31st December 2021 date by which all nursing homes have to be fully compliant with 2016 National standards. Achieving this by year end may be simply impossible for some older establishments. The new regulations will have particular implications for smaller and non-purpose-built nursing home properties throughout the country, that may have no option but to close as the cost of compliance with the standards will be prohibitive.
  • The outlook for investment in the healthcare sector in 2021 looks encouraging with continued institutional appetite for primary care centres, nursing homes and other residential care facilities and private hospitals. We expect to see continued activity over the next 12 months with several groups keen to continue to build their portfolios and consolidate operations here. Investment in nursing homes is likely to continue to be dominated by French, German and Dutch groups while CBRE expect to see Irish and UK funds being the main investors in the primary care centre sector.