Galway's market saw bumper office activity in first quarter
Galway's property market saw increased office activity in the first quarter of the year making the outlook for both office and industrial rents positive. Meanwhile, both commercial and residential development is also increasing, although the prices for older stock is inhibiting speculative development.
These are among the findings in the latest Cushman & Wakefield reports on Galway's office and industrial markets.
In addition, an interesting test of the retail investment market will be the sale and leaseback by bookseller Eason of its city centre property. Agent Bannon is quoting €8 million for the premises at 33 Shop Street. Eason is to take a 25-year lease on the building at a rent of €525,000 per annum, which would equate to a net initial yield of 6pc.
A guarantee from Eason Operations Ltd will cover 10 years of the lease.
Located on Galway's high street, it is a part two-storey and part three-storey building extending to almost 1,043 sq m, including 834 sq m of retail space over ground and first-floor levels.
Equally interesting will be a test of the city centre office market with the sale of the landmark three-storey detached office building known as Victoria House on Eyre Square. Joint agents Cushman and Rooney Auctioneers are guiding €1.25 million for the 3,400 sq. ft. building and they have set 12 July next as the closing date for best bids. It had been occupied by Rooney which is relocating to Ross House, Merchants Road.
Galway's office market recorded a bumper start to 2019 with 6,650 sq m occupied in the first quarter, according to Cushman. That was significantly above the long-run quarterly average and 2018 as a whole.
"Galway is now on track to have its strongest performance in a number of years," says the firm's local director," Patricia Staunton.
A total of 5,850 sq m was occupied across seven suburban units, of which the largest was 2,500 sq m taken by MKO Planning and Environmental Consultants at Tuam Road.
Another large occupation was online travel agents Experi, who took up 2,150 sq m at Block 5, Parkmore East Business Campus.
In addition, one of the deals agreed in the first quarter saw Rent the Runway sign up for 480 sq m at the recently refurbished Piscatorial School, in the Claddagh area of the city. In its first move outside the US, the fashion tech player is expected to move in this summer.
Cushman says prime office rents in Galway sat at €323 per sq m at the end of March, up from €296 per sq m in 2018. The agent predicts that they are likely to remain at this level for the remainder of the year. However new, high-specification, buildings are forecast to achieve higher rents over the coming 24 months.
Cushman's Sean Coyne, says rents for prime logistics and warehousing space in the area reached €80 per sq m in the first three months of the year and were even higher - €86 per sq m - for manufacturing units. He forecasts that rents for logistics and warehousing spaces will increase to €85 per sq m this year. Nevertheless their yields are forecasted to remain stable at 7.75pc.
"The current shortage of industrial supply in the Galway market is set to continue in the short term as current market rents don't support speculative development. Therefore, the majority of new product is likely to be 'Design and Build' to the occupiers' requirements," he added.
Improving confidence in the market is also reflected in new developments in the pipeline.
Following Bord Pleanala's recent decision to grant planning permission for the first phase of a major mixed-use development at Crown Square in Mervue, in the eastern suburbs, builder JJ Rhattigan has indicated that it expects to start work this September on a 51,148 sq m project at the former Crown Equipment site at the junction of Monivea Road and Joyce's Road.
A spokesperson said it is currently engaging with possible operators for the 180-bedroom four star hotel "and we have not yet decided to sell," she added.
CBRE have been appointed agents. The overall project will include over 37,500 sq m of offices and 290 apartments, a neighbourhood centre, entertainment, convenience retail, cafés, restaurants, and primary care centre, around a public square.
Contractor Sisk recently started work on the first two office blocks at Gerry Barrett's mixed-use Bonham Quay which will provide 26,000 sq m of Grade A office space. Cushman is quoting €387.50 per sq m for the first phase of office space. This phase will also include 870 sq m of retail and restaurant space.
To the north-east of the city, McDonogh Capital Investments has signalled that it intends to start work next January on the first office block at the €120 million Eastgate Business Campus adjoining McDonogh Trade Centre and Ballybrit Industrial Estate. Its first phase will include three blocks with a combined 17,300 sq m of offices.
Also to the north of the city, Sigma Retail Partners are progressing the expansion of Gateway Retail Park, which is owned by Oaktree, the US investment fund. Their agents Bannon recently signed up Boots pharmacy chain as its second tenant to joint Harvey Norman in the second phase of the project. Boots are thought to be paying a rent in excess of €35 per sq. ft per annum for the store which will extend to 7,000 sq ft.
Sigma expects to announce a number of new signings very soon for Phase 2 which will provide an additional 120,000 sq. ft. of retail space at Gateway which is on track to deliver the new units for its opening in the first quarter of 2020.
When completed, it will bring eight new retailers, three new food and beverage operators and a gym to the already successful trading scheme.
Current tenants in Gateway Retail Park include Dunnes Stores, Next, New Look, McSharry Pharmacy and B&Q.