Commercial property specialists CBRE today (17 January) released their ‘Outlook 2017’ annual report, containing their final year figures for each sector of the Irish commercial property market in 2016, and their predictions for each sector in the year ahead. The report was launched at the RDS.
The property consultants say that 2016 was an extremely active year in the Irish commercial property market and that 2017 is shaping up to be a busy, albeit different year for the sector.
Speaking at the launch of the 28th edition of CBRE’s report, Managing Director Enda Luddy said, “To say that 2016 was a year of surprises is clearly an understatement. The unexpected outcome of the Brexit referendum last June and in turn the US election result in November took the world by surprise.
“These seismic events will in due course influence the direction of economies the world over including Ireland’s and by default will have implications for the Irish property sector. While the Brexit result will, for the most part, be negative for the Irish economy and lead to GDP forecasts being downgraded somewhat, one of the sectors of the Irish economy that will potentially benefit is the commercial property sector if anticipated Brexit-related relocations from London materialise as we expect they will in 2017”.
The report details that 223 investment transactions of greater than €1 million were completed in the Irish market during 2016, totalling more than €4.5 billion between them. 50% of investment spend last year comprised retail investments, including the Blanchardstown Town Centre and Liffey Valley shopping centres in Dublin.
CBRE stated that it expects this appetite for Irish real estate to continue through 2017, but that total returns, rental growth and investment spend volumes are all expected to be lower in 2017 than last year.
The report also contains information on hotel, office, development land and industrial transactions, with most sectors experiencing positive but subdued activity. Concerning retail, CBRE foresees the potential for further rental growth on high streets, shopping centres and retail schemes in 2017 due to strong competition. The report expect the pace of rental inflation to be lower than in 2016 however.
According to Marie Hunt, Executive Director and Head of Research at CBRE Ireland, “Regardless of the economic or political backdrop, returns from Irish commercial real estate have been slowing for some time now following the extraordinary growth experienced in 2014 and 2015. This easing is expected to continue in 2017, particularly considering the unexpected tax changes announced in Budget 2017, which are likely to impact negatively on pricing this year.
“While we are likely to see some restructuring occurring as a result of the tax changes, we are not expecting significant change in the composition of investor capital flows into Irish real estate in 2017 with both Irish and European institutional investors expected to be most active again this year and Irish REIT’s focussing primarily on development and asset management.
“Although the pace of rental inflation has eased and we are now approaching the peak of the current rental cycle at the prime end of the office sector, good rental growth is still forecasted to be achieved in some sectors of the market this year. Indeed, rental growth in all sectors in Dublin is forecast to be considerably higher than the European average in 2017.”
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