Experts predict 15pc rent rise in commercial property comeback
COMMERCIAL rents are expected to increase by more than 15pc this year, as the property market continues to recover.
Two reports from estate agents CBRE and Lisney have both forecast strong growth in the commercial property sector in 2014. In its preview of this year, CBRE said office rents would continue to rise -- having surged past €35 per square foot in the past year -- the base level for new construction -- and is likely to top €40 by year end.
According to CBRE's Marie Hunt, prime office rents in Dublin 2 and Dublin 4 surged 25pc last year and that trend is set to continue.
While the office market is leading the way in terms of recovery, with overseas investors such as Kennedy Wilson and Blackstone spending hundreds of millions of euro on assets here, CBRE's Marie Hunt said there was now growing confidence in the retail sector. That sector suffered disproportionately during the crash, with rents in Dublin's Grafton Street dropping from about €10,000 per square metre in 2006 to less than €4,000 today.
"While the market is beginning to bottom out, much of the take-up has been by discount retailers in recent years. That will start to change in 2014, however, according to CBRE," she said.
"We expect to see stronger volumes of activity in the Irish retail property market over the course of the next 12 months, and rent growth should return this year," she added.
The industrial market -- warehouses and data centres mainly -- was crushed during the downturn, with rents plunging in the open market.
Now however, that market too is beginning to flatten out, with prime rents approaching €80 per square metre.
Some €2bn worth of commercial property deals were done in Ireland last year, driven mainly by the big overseas investors. That, combined with the squeeze on supply, will continue to push yields lower.
CBRE say that vacancy rates in central Dublin were now close to 4pc, and yields were falling back below 6pc.
CBRE managing director Enda Luddy said that if last year was a turning point in the commercial property market, then 2014 promised to be "even busier than last year".
Those words were echoed by Lisney estate agents. Company managing director James Nugent said the Dublin office market would continue to spike in 2014. "Prime rents are now just at the levels required to justify new construction. Accordingly, we will start to see some developers with well-placed sites in the city centre begin construction in 2014."
This will be welcome as it eases concerns about Dublin having insufficient quality office stock to meet market and FDI demands. "There are significant opportunities to refurbish older buildings in the city and capitalise on the rising rents and limited supply," he added.