Demand for Dublin office space to move to the suburbs in Q3
A severe shortage of stock to meet the volume of domestic and international demand continues to be the biggest challenge facing Ireland's commercial property market, according to the findings of CBRE's latest bi-monthly report.
The coming months should see that pressure eased however, as new product is released for sale following the traditionally quiet summer period.
Commenting on the outlook for the market as the third quarter begins, CBRE executive director and head of research, Marie Hunt, said she expects prime yields to tighten as new transactional evidence emerges over the course of the autumn.
While she noted an increase in investor appetite for opportunities in Cork and Galway in recent months, this demand has been constrained by a shortage of investment stock in both locations.
Looking at the prospects for the Dublin office market, CBRE expects a "significant proportion" of transactions to occur in the suburbs.
With prime office rents in Dublin stable at €62.50 per square foot, the attractiveness of locations such as the Sandyford Business District (SBD) where rents average €30 per square foot should serve to support that view.
Only last week, it emerged that US web giant Google is set to lease the Blackthorn Building in Sandyford in its entirety.
The news follows AIB's recent agreement to take space with the capacity for 1,500 workers in Block H at Green Reit's Central Park development at a rent of €27 per square foot.
In terms of the hotel sector, CBRE reports that the four-star Carton House Hotel, which is guiding €60m, has attracted a significant level of international interest. Best bids are to be invited on the property in the coming weeks.
CBRE anticipates a greater focus from retailers on improving multichannel strategies. Referring to a recent finding from Retail Excellence Ireland that consumers are now spending a combined €850,000 per hour online, with 70pc of that spend going to international retailers, CBRE notes that this is an "obvious loss to the Irish exchequer, particularly against the backdrop of weaker sterling".
With prime rents in the industrial and logistics sector now in the order of €99.50 per square metre, CBRE believes new development is justified to meet new demand.