Impact of Donald Trump and Brexit to weigh heavily on Irish property sector in 2017
Commercial property specialists CBRE expect to see continued appetite from investors for Irish real estate in 2017, but a “scarcity of prime product” will prove to be the “biggest challenge” to the market following the record-breaking performances of the last two years.
Some 223 transactions greater than €1m were completed in the Irish market in 2016, bringing the total value of investment spend to over €4.5bn according to CBRE’s Outlook 2017 annual report.
Speaking at the report’s launch at Dublin’s RDS this morning, CBRE Ireland managing director Enda Luddy grounded his firm’s predictions for the coming year in what he termed the “seismic events” of 2016. Mr Luddy said the unexpected outcome of both the UK referendum on Brexit and the US presidential election would “by default have implications for the Irish property sector”.
In terms of overall investment, CBRE expects to see total returns, rental growth and investment spend lower in 2017 than last year.
As the “first meaningful improvement” in new office supply becomes evident, CBRE are anticipating that prime office rents in Dublin will reach the peak of the current cycle in 2017. Any deterioration in office demand from the USA this year will however be compensated for by an increase in Brexit relocation activity from the UK, the firm predicts.
While the hotel sector is expected to see a slowdown in transactional activity compared to 2016 and 2015, CBRE believes that some Dublin hoteliers may look to capitalise on the demand for hotels in the capital and bring hotels to the market in advance of an increase in new supply coming on stream from 2017 onwards.
Up to 40 Dublin pubs are expected to change hands this year, and at average prices above the €1.44m average achieved in sales in 2016.
CBRE believes the retail sector has potential for further rental growth on high streets, in shopping centres and at retail schemes, albeit at a more subdued rate than in 2016, due to strong competition.
The industrial sector would appear to show the greatest potential for growth according to CBRE’s analysis. While noting the 25pc increase in prime rents recorded in 2016, their report suggests there is potential for prime industrial rents to rise by another 14pc in 2017 off the back of “considerable appetite from distribution and logistics operators and data centres in particular”.
On the development front, CBRE sees a “meaningful improvement in residential delivery from this year onwards” following a range of housing market interventions by the Government in 2016.
An increased appetite for sites for PRS (Private Rented Sector) and student accommodation will dominate in 2017, according to the report.