What will Autumn 2020 Hold for Ireland's Commercial Property Market? - Construction Network Ireland - Construction Network Ireland

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Published in Commercial Property on 01/09/2020

What will Autumn 2020 Hold for Ireland’s Commercial Property Market?

CNI Editor reports

Commercial property specialists CBRE Ireland today released their latest bimonthly report for September 2020, commenting on trends and transactions in all sectors of Ireland’s property market as the official Autumn selling season commences. According to CBRE, September will again mark a turning point for the Irish market in 2020, with a welcome increase in transactional activity anticipated in some sectors of the market from this point forward. However, the Autumn season will be different this year as all sectors of the property market adapt to a new reality following six unprecedented months, during which record transactional activity came to an abrupt halt, structural issues that were already impacting the property market to some degree were significantly accelerated and huge societal change occurred. 

The continued low interest rate environment coupled with unallocated capital positions means that there is now considerable investor liquidity built up and looking to deploy into Irish real estate. A number of transactions are already underway, and several assets are ready to be formally launched with up to €1 billion of assets expected to be brought to the market over the coming months. However, the property consultants say that some campaigns will inevitably be delayed by the latest set of Government restrictions, which reversed some aspects of economic reopening and once again require non-essential work to be conducted from home until at least September 13th. Nonetheless, although travel restrictions will, for the foreseeable future, limit the ability of some to travel to Ireland to inspect buildings and conduct due diligence, vendors and agents have embraced technology and devised alternative solutions to enable potential occupiers and investors to review opportunities remotely. However, according to CBRE, domestic investors and entities with decisionmakers in-country will clearly have a distinct competitive advantage over the coming months.

According to Marie Hunt, Head of Research at CBRE Ireland, “Signs of increased activity will first become visible in the investment sector of the market, primarily as a result of the number of assets (predominantly multifamily properties), that traded during the Summer as well as those that are due to be offered for sale over the coming months. We have visibility on up to €1 billion of assets that are likely to be offered for sale over the next few months, which will please the many investors who are looking to deploy. Recovery will however be slower to materialise in the occupier and development sectors of the market. There are a number of office and industrial leasing deals in legals, which will provide a welcome boost to these sectors following a disappointing Q2, although, for the most part, occupiers will remain reluctant to make significant expansion or relocation decisions for some time yet”.


  • With office occupiers now working remotely for almost six months, the impact on office occupier activity is worse than anyone anticipated in March.
  • With a number of office transactions having completed during July and August and some others due to sign over the coming weeks, the expectation is that office take-up in Dublin in Q3 will show a marked improvement on last quarter – the lowest quarterly take-up ever recorded in the capital with only 9,885m2 of transactions signed in the three month period. However, large-scale expansion and relocation decisions are expected to remain firmly on hold until such time as decisionmakers can travel and companies can determine their long-term headcount and space requirements.
  • Most of the requirements that are active at present are for relatively small amounts of accommodation and invariably triggered by upcoming lease events, with most occupiers focussed on fitted space.
  • There has been an increase in lease regears, and some increase in incidences of occupiers looking to sublet excess office accommodation in recent weeks. The volume of ‘grey space’ that comes available will ultimately dictate the extent to which the overall rate of office vacancy in the capital (6.65% at the end of Q2) increases over the coming months. A critical difference between this cyclical downturn and the last is that vacancy will be largely unaffected by new supply in this cycle with very little new office accommodation that hasn’t been pre-let due for delivery in the next 12 months and commencement on some schemes being delayed.
  • With continued speculation on ‘the future of the office’, there been increased appetite for flexible office leasing solutions over recent months, from companies who are, at this juncture, unsure of their future headcount or unwilling to commit to long-term leases in the current climate.
  • Amid reduced leasing activity, prime headline rents in Dublin have nevertheless remained steady at €700 per square metre. However, some softening is expected over the coming months as new transactional evidence emerges, with secondary buildings most susceptible to a slight downward revision in rental levels and further outward moves in tenant concessions. With occupier demand expected to rebound in 2021 when travel restrictions are lifted and economic activity picks up, the next couple of months could prove to be a ‘window of opportunity’ for occupiers who are in a position to take advantage of the ability to negotiate keener deals in the current climate.


  • Compared to other sectors of the property market, the industrial and logistics sector has weathered the pandemic storm particularly well and there is occupier activity underway off-market as well as a number of deals in legals, which is encouraging.
  • Some occupier types, such as those involved in leisure or certain elements of retail, are particularly vulnerable as a result of their direct exposure to economic activity and trade. However, other parts of the industrial and logistics market have actually benefitted to some degree from lockdown with the need for modern high-quality logistics and distribution more important than ever.
  • There has been increased appetite for large buildings over the last number of months, boosted by an increase in online retailing and increased demand for storage and distribution of vital inventory such as pharmaceuticals and foodstuffs. There has also been strong demand for industrial sites from data centre operators with these end users competing directly with developers of traditional industrial product for well-located land parcels in and around the M50 corridor and also in some prime regional locations.
  • Prime rents in the industrial sector are expected to remain unchanged for the remainder of 2020, primarily due to the fact that there is no new stock due for delivery that isn’t already pre-committed. Such is the strength of appetite for modern premises that negotiations have, in some cases, started already on stock that has yet to commence construction.


  • Consumers have adjusted their shopping behaviours in the last six months with more trade occurring online and physical shopping now more tactical than experiential.
  • Conditions remain very challenging with several retailers making the difficult decision to close some or all of their Irish stores in recent months. Meanwhile, many stores that have fully reopened are reporting that footfall remains depressed and turnover negatively impacted. The effect has been particularly felt on high streets around the country, which are suffering from a combination of reduced store capacity and a lack of office workers, overseas tourists and students. Retail parks and shopping centres have been performing somewhat better by virtue of being in a better position to enforce social distancing.
  • Although some transactions have been recorded in the last few months, transactional activity in the retail property market remains largely paralysed with vacancy continuing to increase and an escalation in negotiation between landlords and tenants, many of whom are struggling to meet rent and service change payments in the current climate. Landlords are, in many cases, slow to make decisions, but we are seeing incidences of leases being restructured and temporary arrangements being put in place, particularly where retailers can provide figures to clearly demonstrate the decline in trade that is being experienced.


  • Considering the volume of liquidity that has built up over the last six months and investor appetite for Irish real estate assets, this sector of the market has the potential to rebound quickly once economic activity improves. Q3 will see a resumption in trading activity. However, until such time as travel restrictions are lifted and investors can travel safely to inspect and assess opportunities, investment volumes will unfortunately remain constrained.
  • However, a number of sales process are currently being conducted off-market (particularly in the multifamily sector) and there is up to €1 billion of stock due to be brought to the market over the coming months. With a number of assets ready to be formally launched for sale and considerable investor liquidity built up and waiting to deploy, vendors and agents are considering how best to launch assets while travel restrictions remain in place. The use of technology and direct access to key decisionmakers in the global investment houses will therefore form part of the solution going forward. 
  • While the direction of yields across Europe has adjusted slightly, prime yields in the Irish market, with the exception of retail, have been resilient over recent months, despite the pandemic. For many sectors of the Irish market including offices, industrial and multifamily, as opposed to an expected contraction during 2020, there has been no change whereas the retail, hotel and student accommodation sectors of the market have experienced some softening.


  • With very few sales processes underway at present in the development land sector, the outturn for the year will be considerably down on last year. There has been an increase in pitching activity in recent weeks, which is anticipated will translate into some sites being publicly being offered for sale later in the Autumn. It is likely that many of these site sales will be receivership sales. For the most part, vendors are reluctant to offer sites to the market in the current climate. This is despite the fact that house prices have held up remarkably well during the last six-month period.
  • Developers have welcomed the expansion of the ‘Help to Buy’ scheme announced as part of the Government’s July Economic Stimulus plan. However, stimulus measures such as this, while welcome, are arguably feeding the demand side of equation as opposed to the supply side, which remains severely constrained. In fact, only 3,290 housing units were completed in Ireland during Q2 bringing total delivery in the first half of 2020 to only 9,952.


  • The multifamily sector continues to perform well regardless of underlying economic conditions and the impact of Covid-19, with cashflows and yields in this sector proving particularly resilient over recent months. While investors clearly have a preference to acquire complete or partially complete residential stock, the reality is that this product is scarce. Therefore, most investors are accessing product by acquiring stock with planning permission, but which has yet to commence construction. It may prove possible given the nature of these forward-sale transactions to conduct sales processes remotely.
  • Several sales processes have continued off-market in the multifamily sector over the Summer months and several assets are being prepared for sale.
  • An increasing number of investment funds are interested in opportunities to acquire units let to local authorities and housing associations with demand for investment in social leasing having picked up pace since the new Government reiterated their commitment to increase the volume of social housing provision.


  • The owners and operators of hotels have understandably been primarily focussed on the survival of their businesses over recent months. From a property perspective, several mandates and sales processes were put on hold and transactional activity in the hotel sector was therefore disappointingly low during the first half of the year. However, some buyers are keen to take advantage of acquisition opportunities in the current climate and negotiations have started to reignite recently on some of the assets that were being formally marketed before the Covid-19 pandemic struck. There is some activity underway off-market, with particular appetite for hotel development projects.
  • At this stage, it looks likely that some schemes that had applied for or obtained a grant of planning for hotel use, and have not gone on site,  may now go back to the drawing board and look for permission for alternative uses, such as public or private housing, instead.


  • Continued strong appetite from investors for assets in the healthcare sector with further consolidation expected over the coming months.
  • In general, it is accepted that turnover in every nursing home will have been negatively impacted during the first six months of 2020 as a result of Covid-19 and its direct impact on occupancy levels. There has however been no evidence of any deterioration in values or diminution in multiples for future-proofed, good quality nursing home stock.
  • Buyers remain focussed on investing into the sector. They are paying particular attention to the quality and performance of the assets and are willing to pay premium prices for the best properties. There is however much greater scrutiny on the configuration of buildings with respect to infection control.
  • Operators are now understandably concerned about the possible introduction by HIQA of additional infection control measures and how these will be implemented along with other standards that are due to be enforced in December 2021 as these new standards will ultimately determine whether certain nursing homes will or will not survive into the future. Smaller facilities may come off the worst here as they are unlikely to have the capacity to change their physical or clinical configuration.


  • Activity has been subdued in the Cork property market over recent months, both from an occupational and investment viewpoint. Having said that, a number of occupier transactions are currently in legals, which will provide a boost for this market in due course. There has been a welcome increase in office enquiries in recent months, albeit it will likely be later in 2020 or early 2021 before these translate into completed leasing deals.