Commercial market hits highest level in six years
THE commercial market has been given another shot in the arm, after new data showed transactions have hit their highest level in six years, and rents continue to increase in certain sectors.
Data from CBRE shows activity in the market is now at its highest level since the peak of the bubble in 2007, with deals across all sectors well up on last year.
The bi-monthly report shows headline rents surging across the office market, but also increased activity in the industrial markets and even some improvement in the retail sector as well.
While the market is coming off a low base, CBRE Ireland's managing director Enda Luddy said demand has been such that properties were still coming to market at a time when things are usually winding down ahead of Christmas.
"This year has been a very strong one for the Irish commercial property market with recovery now evident in each sector of the market and a marked improvement in transaction volumes across all sectors.
"At this stage in the year the focus would normally be on getting transactions closed by year-end but such is the weight of demand for prime real estate at present, we are continuing to see new properties and portfolios being released for sale even at this late stage in the year," he added.
In the office market, prime rents are now €350 per sqm, right on the minimum level needed to new construction to make economic sense. That will only increase though. CBRE are forecasting prime rents to top €377 per sqm by the end of the year and to rise by another 15pc at least during 2014.
The uptick in the market has already prompted developers to demolish old offices in prime locations and prepare to build top spec, modern offices in their place.
Burlington House in the heart of Dublin 4 is set to be knocked down after planning permission was finally granted last week, while a vacant office building on St Stephen's Green in the centre of Dublin is also on the verge of being demolished to allow new construction.
Outside of the top locations, office rents are now at €172 per sqm in the south of the city, €151 on the northside and €134.50 in the west of Dublin.
Already more than 110,000sqm worth of Dublin offices have been let in the first nine months of the year, with numerous deals completed in Q4.
Among the recent deals were the letting of some 9,200sqm to William Fry solicitors in 2 Grand Canal Square.
As well as that, financial firm SIG paid €34.5m for the AIB Treasury Building in the IFSC.
That trend will only continue, say CBRE as the shortage for top-quality office buildings continues to be an issue.
While rents are rising sharply in the office sector, there is "no evidence yet of prime industrial rents rising beyond their current level of approximately €60 per sqm although inducements such as rent-free periods are starting to reduce in this sector," say the firm.
Mr Luddy welcomed the launch of the Commercial Lease Database, but warned the jury was still out on how effective it will be in the short term, while initial teething problems are sorted out in a manner similar to what happened when the residential Property Price Register started earlier this year.
When it comes to the retail sector, what recovery there has been is focused almost entirely on the prime shopping streets in Dublin.
Grafton Street rents remain strong at €4,000 per sqm, while Henry Street properties can be let for around €3,500 per sqm.
Numerous retailers have taken up the nine properties that were vacant on Grafton Street at the beginning of the year, most notably the clothes seller Massimo Dutti is in the process of moving into the former HMV premises on the street.
Outside of those prime sites however, rates fall away quite sharply.
A premises in The Square shopping centre in Tallaght can be had for €1,500 per square metre while city centre shops outside Dublin are available for about €1,000 per square metre.
CBRE are forecasting total sales in the commercial market to top €1.5bn by the end of the year, with that rate set to continue into 2014.