Resilience of the Irish Commercial Property Market Tested in 2020 - Construction Network Ireland - Construction Network Ireland

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Published in Commercial Property on 02/11/2020

Resilience of the Irish Commercial Property Market Tested in 2020


CNI reports

Commercial property specialists CBRE Ireland have released their final bimonthly report for 2020, commenting on trends and transactions in all sectors of Ireland’s property market as we near the end of what the property consultants describe as a ‘challenging and unprecedented’ year for the market. 

According to CBRE, transactional activity in most sectors of the market was negatively affected as a direct result of the economic impact of the threat of a no-deal Brexit and the Irish Government’s response to Covid-19. With the exception of the undersupplied multifamily sector and the industrial and logistics sector of the market, which benefitted from increased Brexit-related and Ecommerce activity, most occupational and investment sectors of the commercial property market were negatively impacted.

The impact has clearly been particularly evident in the retail, hospitality and leisure sectors of the market although activity in the office occupier market has also been negatively impacted as many occupiers put off making location decisions during 2020. Transaction volumes in the development land market are also significantly down year-on-year according to CBRE.

Commenting on the report, Marie Hunt, Head of Research at CBRE Ireland said, “Although investors continued to seek out opportunities in the Irish market throughout the year and we saw some transactional activity occurring regardless, the inability of international investors to travel to the island to inspect properties posed a very real challenge and impacted investment transaction volumes. Values also came under some pressure, as evidenced from the most recent MSCI Irish property index, with some sectors such as retail impacted more significantly than others. 2021 will be all about rebuilding and reigniting the market following what has been a very challenging and unprecedented year”.


  • 2020 has been a very disrupted year for the Dublin office market. Following a bumper volume of transactional activity in Q1, Covid-19 created huge indecision and many large transactions have been put on hold indefinitely since the country first went into lockdown in March.
  • Total take-up in the Dublin market reached more than 130,000 square metres in the first nine months of 2020. There is currently more than 30,000 square metres reserved but even if all of this stock signs by year-end, annual office take-up in the capital will be considerably lower than in recent years.
  • Most office occupiers are reluctant to make long-term commitments in the current climate and there is little urgency in getting transactions signed. There has been increased demand for flexible accommodation and where tenants are committing to long leases, they are invariably looking to incorporate break clauses and more flexibility.
  • Although new supply continues to come on stream in a measured way, one of the more noticeable trends over recent months is an increase in so-called ‘grey space’ as some companies seek to sublet or assign excess accommodation. According to CBRE research, the volume of ‘grey space’ being marketed has increased by 65% since the onset of Covid. High-quality secondary accommodation is now competing directly with newly-built stock.
  • There has been some softening in headline quoting rents in Dublin of late albeit the magnitude of decline is marginal compared to the very sharp correction in rental values that occurred following the Global Financial Crisis. As opposed to a dramatic fluctuation in rental values, we are likely to see more generous incentives and greater flexibility being built into leases for the foreseeable future.
  • While the volume of demand for accommodation has decreased in recent months, it remains encouragingly above the long-term average for the city, at almost 240,000 square metres, having been boosted recently by a large requirement from Bytedance.


  • The industrial and logistics sector continues to buck the trend in the commercial property market, with strong levels of transactional activity recorded (both on and off market) over recent months, boosted somewhat by Brexit planning but to a greater degree by increased Ecommerce activity. With the entire country now in Level 5 lockdown and non-essential retail stores closed for up to 6 weeks, an even greater proportion of retail spending in the run up to Christmas will occur online this year. This in turn, is fuelling already strong occupier demand for modern logistics properties.
  • CBRE Research shows that a total of 206,111m2 of industrial take-up was achieved in the Dublin market during the first nine months of 2020, broadly in line with the volume achieved in the same period last year with a strong Q4 in prospect considering the number of properties that are reserved and in legals at present.
  • In contrast with other sectors, prime industrial rents in Dublin have continued to increase. Prime headline rents in this sector are now trending at €113 per square metre.


  • With only ‘essential retail’ trading from physical stores, much of this year’s Christmas spending will occur online. From a property perspective, retail parks and neighbourhood retail schemes continue to perform well as people stay local.  However, vacancies have continued to escalate on prime high streets and in shopping centres around the country in recent months. City centres have been particularly adversely affected due to the absence of students, office workers and tourists.
  • While transactional activity is understandably limited in the current climate, the likelihood is that when new letting evidence emerges, prime headline rents will be between 10% and 20% below the Zone A rental values that prevailed at the beginning of 2020.
  • Retailers who had agreed or were close to agreeing solutions with their landlords in respect of missed or delayed rent payments from the first lockdown in March/April will now have to renegotiate settlement terms for the most recent enforced closures. In recent weeks, the Government published guidance for landlords and tenants, but the reality is that this code of practice is not enforceable and merely guides landlords and tenants to possible solutions until we emerge from the Covid-19 pandemic and retail can once again thrive.  CBRE say that both landlords and tenants will have to dig deep to find mutually acceptable solutions until such time as normal trading can ultimately resume.
  • From an occupier perspective, there are several retailers who view the current market as an opportunity to expand and secure stores in particular locations and schemes. Many of these retailers have been actively bidding on vacant properties over recent months.


  • Investor interest in the real estate asset class remains robust. Demand for core assets remains particularly healthy with some transactional activity continuing despite travel restrictions and lockdown measures. The removal of ‘material uncertainty’ clauses from the valuation of some market sectors has boosted investor appetite in recent weeks.
  • According to CBRE research, almost €2.4 billion was invested in the Irish investment market in the first nine months of 2020, compared to €3.3 billion in the same period last year. While investors have largely adapted to changed circumstances over recent months, the reality is that sales processes have become more elongated and decision-making is taking longer, meaning that many of the assets launched for sale during the Autumn season are unlikely to complete until early 2021. Nevertheless, the likelihood at this juncture is that Irish investment spend for the year as a whole will be close to €3 billion, which is a decent result considering the challenging market conditions.
  • The slowdown in transaction volumes during 2020 has had a divergent impact on pricing across Europe. Security of cashflow is understandably critical to pricing in the current climate. While the industrial and multifamily sectors have generally demonstrated great resilience, pricing for core-plus and value-add opportunities in other sectors has come under some pressure with divergence between bid and asking prices in sectors such as retail and to a lesser extent offices. In the Irish market, the only sector where some strengthening in pricing is anticipated is in the industrial sector with other sectors at best remaining stable and at worst continuing to soften in line with weaker investor appetite.
  • There has been increased appetite in sale and leasebacks over recent months and this is likely to escalate 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.


  • Like many other sectors, transactional activity in the development land sector of the Irish property market has been negatively impacted by uncertainty since the onset of Covid-19 last March. Although house prices have performed considerably better than many commentators anticipated and the housing market remains fundamentally undersupplied, very few sites have been formally brought to the market during 2020 and a number of sales campaigns were postponed due to the inability of bidders to travel to undertake inspections.
  • Development land spend in the first nine months of 2020 totalled less than €185 million compared to approximately €767 million in the same period in 2020. CBRE say that if the Glass Bottle site transaction in Dublin 4 completes by year-end, as anticipated, this will provide a welcome boost to transactional spend in this particular sector.


  • The multifamily sector of the Irish investment market has continued to demonstrate stability throughout Q3 despite the economic backdrop, with yields in this sector remaining unchanged quarter-on-quarter and encouraging occupancy and rent collection rates continuing to be achieved, particularly in the mid-tier market. CBRE believe that this sector is likely to be the most dominant sector of the Irish investment market in 2020.
  • Over the last few months, there has been an escalation in interest from both domestic and international investors in long-term leasing to local authorities. This has escalated further since Budget 2021 when the Government reiterated their commitment to reducing social housing lists over the coming years by a variety of means including long-term leasing. Several developers are at an advanced stage of negotiation with both local authorities and the Housing Agency, which will provide some much-needed social housing stock in a range of different local authority areas in due course.
  • CBRE anticipate continued appetite for multifamily investment throughout 2021 and expect continued strong demand from investors for the portfolios that are currently being prepared for launches in the early part of next year. Clearly, demand will be strongest for schemes that are under construction and less than 12 months out from delivery.


  • Transactional activity fell dramatically in the hotel property market during 2020 with very few properties having changed hands this year. However, CBRE report greater engagement and increased activity during the Autumn months. Bids have been received for several hotels in the last few weeks, which should see some hotel transactions being completed in the early part of 2021, albeit some of these transactions will be structured differently to enable transactions to proceed. 
  • Domestic bidders clearly have an advantage at present but despite being unable to travel to inspect properties, it is encouraging that many international hoteliers remain keen to get a foothold in the Dublin market.  There is particularly strong demand for development projects that are due to commence trading from 2022 onwards, demonstrating investors belief in a rapid recovery in this sector in due course.
  • The decision to reduce the rate of VAT for the hospitality and tourism sector from 13.5% to 9% in October’s Budget was broadly welcomed by the industry but will do little to stimulate turnover in the short to medium term. 


  • There was considerable consolidation witnessed within this sector during 2020 with several new entrants acquiring both individual nursing homes and nursing home portfolios during the year. A number of additional high-profile consolidation transactions are currently underway, some of which are likely to complete before year-end.