Demand boosts renewal and investment activity in Cork city
Cork city's prime office rents are forecast to increase by €5 per sq m to €355 per sq m in the nine months to the end of the year. Meanwhile prime office yields will harden from 5.5pc to 5.25pc over the same period.
These are among the forecasts from Cushman & Wakefield, one of the agents which has been monitoring commercial property trends in the southern city.
While rivals CBRE concur that Cork office rents and yields will strengthen, they say that Zone A prime retail yields will weaken from their current 5.75pc levels despite retail rents remaining stable at €2,150 per sq m. The zone A area is the key retail sales area within a property.
Meanwhile Lisney estimates prime yields as being higher across all sectors in the first quarter of the year with both offices and retail at 6pc but sales of existing residential rental portfolios have seen much keener gross yields of 5.25pc.
Lisney put net prime industrial yields between 7.5pc and 8pc whereas CBRE has industrials at a much stronger 6.5pc based on a rent of €91.50 per sq m.
Cushman agrees with CBRE on 6.5pc industrial yields in the first quarter of this year. However with rents rising by €5 to €90 per sq m by the end of this year and holding those levels next year, Cushman expects industrial yields to rise to 6.75pc next year.
Margaret Kelleher of Lisney says that following strong investment sales in 2018 of about €270m, this year started more quietly. Just four investment deals concluded in Q1 at a combined price of almost €10.95m. The largest was an office building in Cork Airport Business Park, which was purchased by Yew Grove Reit for €7.5m at a net initial yield of 7.8pc.
On Cork's high street, a retail property let to Carphone Warehouse at 79 Patrick Street sold for €1.55m.
Including more recent deals, Oliver Plunkett Street has seen four retail units sold including three at 21, 22 and 23 with combined rents of €110,000 which were bought for €1.25 million by a Swiss investor. Number 88 on that retail street was also sold for €500,000.
In addition a mix-use property on Douglas Street was sold for €1.4m.
"While the total market turnover in Q1 is low, and substantially lower than the same period last year when the sale of the Elysian distorted figures, it should be noted that there are several buildings at agreed stage and have combined asking prices of about €36m," Ms Kelleher says.
Additionally, there is €95m worth of property available for sale, including the suburban Wilton Shopping Centre which has an €86m price tag and also has planning permission for further development. Last month An Bord Pleanála gave the Clarendon-led owners the green light for a 21,223 sq m extension including a 14 screen cinema, about 4,400 sq m of offices and a 190-bedroom hotel.
Savills and CBRE and also reporting Irish and international investor interest in the mixed-use investment at Half Moon Street on Lavitt's Quay in the city centre which has a €34m guide price.
Denis O'Donoghue of CBRE points to increasing signs of development activity delivering high-quality office schemes, student accommodation and hotels.
In addition, 5,576 sq m of new industrial stock is currently under construction at Blarney Business Park.
"This is very encouraging considering that our research shows the current rate of vacancy in this sector at 5.7pc, down from 7pc in March 2018," he adds.
Cushman also points to office development activity. Recently 85 South Mall, measuring 4,300 sq m, completed construction and was fully pre-let. A further six schemes were under construction at the end of Q1, totalling 51,400 sq m. The city centre sees the largest proportion of this, with 39,450 sq m on site. This includes office developments at Penrose Dock, Horgan's Quay and Navigation Square.
Since the end of Q1, East Gate, Island Hall has completed construction and pharma giant, Lilly, are now occupying the unit which extends to 6,350 sq m. All remaining schemes are expected to complete in between the end of this year and early 2020.
Among the projects to recently receive An Bord Pleanála's approval are Tower Holdings' €20m Prism Building office development extending to 5,574 sq m close to Parnell Bus Station in the city centre. Adjoining that site, Tetrarch Capital, has got the green light for a 165-bedroom hotel and some retail at 7/8 and 9 Parnell Place, Deane Street, and Oliver Plunkett Street. Combined with the Prism, Penrose and Horgan's Quay (HQ) developments, these urban renewal projects are expected to considerably enhance the built environment between the bus station, docklands and the railway station. Clarendon has pre-let 30,000 sq ft of its office developoment at HQ and expects occupants to move into the hotel and offices by summer or autumn 2020.
Mr O'Donoghue says despite occupier demand, Cork apartment development has been slower because Vat and other costs are affecting their viability.
He estimates that in the Cork metropolitan area which includes Carrigtwohill, Cobh and Ringaskiddy, just over 5,000 acres of land is zoned for development and about 10pc of these acres have planning permission for 8,000 units.
Currently 3,200 units are under construction on 33 sites with a combined 225 acres. He expects 750 houses to have sales completed this year.
Demand for sites remains strong as evidenced by the appetite for a 7.24-acre site on South Douglas Road, where the vendor agreed a sale by way of licence and subject to planning permission for a price in excess of €10m.
It is expected to accommodate about 150 houses and apartments.
Brokered by Peter O'Meara of Savills, the deal will see the site acquired by Centurion Homes, one of whose directors is Mark Leonard, son of Corkman Tony Leonard of Clarendon Properties.