Commercial rents in the Irish capital could rise by as much as 15 per cent this year as the city braces itself for a record number of commercial developments. Two of Ireland’s leading estate agents have confirmed the office market is leading the recovery with prime office rents in Dublin 2 and Dublin 4 to rise to about €435 [£358] per square metre by end of 2014. Rents in both areas saw an increase of over 25 per cent last year.
“The year ahead is shaping up to be an even busier period for the Irish commercial property market than last year, fuelled to a large extent by improving domestic economic indicators and by some improvement in the availability of debt funding,” said CBRE Ireland’s managing director Enda Luddy.
His confidence was echoed by James Nugent, managing director of estate agents Lisney. “Prime rents are now just at the levels required to justify new construction,” he said. “Accordingly, we will start to see some developers with well-placed sites in the city centre begin construction in 2014.”
While this will ease concerns over Dublin meeting the demands of foreign direct investors there are also significant opportunities to refurbish older buildings in the city and capitalise on the rising rents and limited supply, Nugent added.
During 2013 there was a 25 per cent increase in Dublin office take-up and a near 4 per cent decrease in the overall vacancy rate in the office market. In total, there were almost one hundred investment property transactions of over €1m [£824,000], with the take-up of industrial space in the capital rising to nearly 100,000 square metres.
Both executives feel that while the office market is leading the way in terms of recovery, the retail sector, which suffered disproportionately during the crash, is now also keeping pace with the recovery. Rents in Dublin’s Grafton Street now stand at around €4,000 [£3,296] per square metre, compared with the 2006 peak of €10,000 [£8,240].
Previewing likely trends for 2014, CBRE Ireland said there should also be strong activity in the retail property market, with existing retailers relocating and several new international names entering the market.
“While the retail market is beginning to bottom out, much of the take-up in recent years has been by discount retailers,” CBRE’s executive director and head of research, Marie Hunt, explained. “We expect to see stronger volumes of activity in the retail property sector over the course of the next 12 months, and rent growth should return this year.” The momentum will not be restricted to the leading shopping centres and prime high street locations, she added, with secondary street and provincial locations also benefiting.
The selling and rebranding of hotels across the country is also expected to continue. Thirty-three hotel deals, worth a combined €160m [£131m], were signed last year; compared to 24 in 2012 valued at €146m [£120m]. Significantly, attention is now turning to prime city centre hotels with several already listed for disposal, as demand from overseas buyers continues.
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