Dublin's Industrial Sector Will Be 2018's Cash Cow
The industrial sector could prove to be the big money maker for Dublin in 2018 with industrial prime rents increasing by 11%, according to CBRE.
“The Irish CRE market is now approaching late cycle in many respects," CBRE Executive Director & Head of Research Marie Hunt said at its annual predictions event. "However, occupier activity remains robust, development is controlled, the market is priced attractively compared to the rest of Europe and there are still considerable opportunities for both occupiers and investors alike.
"In addition to demand for office and industrial & logistics opportunities, we expect to see continued flows of capital into alternative sectors over the course of the next 12 months with particularly strong demand for residential investment opportunities in Dublin, considering the stable long-term income streams this sector can deliver. Alternative sectors will become increasingly mainstream.”
The money maker
The industrial and logistics sector is most likely to outperform other sectors in 2018 with high demand around Dublin’s M50 and Little Island in Cork.
Last year the sector was characterised by severe shortages of industrial stock needed to satisfy demand which fuelled rental growth and impacted negatively on take-up volumes. But stock is expected to be delivered this year and a corresponding uplift in transactional activity will follow.
”Until there is a meaningful improvement in new supply, prime rents in the industrial sector are expected to continue to rise,” Hunt said.
Prime headline industrial rents in Dublin are expected to rise by approximately 11% in 2018 which will equate to €10.25 per SF by year end.
Beds, beds and more beds
CBRE expects to see a lot more Dublin hotels coming to the market during the next 12 months. If this materialises, the property consultants believe we could see up to €500M of Irish hotels changing hands in 2018, with a sizeable proportion of these transactions occurring off-market.
This is in contrast to last year, when 36 hotel sales concluded in the Irish market totalling over €405M, which was a decrease to the previous three years in which more than 60 hotels changed hands each year.
Love where you work
Considerable expansion activity is expected in the office market in 2018. It will follow another strong year of take-up following a record performance last year, boosted by a number of Brexit-related moves.
Office take-up of more than 356,285 SF was achieved in Dublin in 2017 in 237 individual transactions. One hundred thirty-one of the transactions in 2017 were to Irish companies while 54 were to U.S. companies and 30 were to U.K. companies. The volume of office space leased by U.K. companies more than doubled year-on-year.
Headline rents will remain relatively stable at last year's level of €700 per SM throughout 2018. There may, however, be some exceptions where small suites or superior buildings achieve premium rental values.
According to CBRE, the best prospects for rental growth in the office sector in 2018 will be in buildings in secondary and provincial locations.
Shop till you drop
Rental growth is to remain steady in the most sought after streets and schemes but remaining relatively flat elsewhere during 2018, as the retail sector reacts to structural changes.
A scarcity of premises in the most highly sought-after locations is likely to continue to frustrate retailers.
CBRE expects to see continued appetite for prime investment opportunities in the Irish market in 2018 with investors increasingly focused on good income-generating opportunities in the office, industrial & logistics and residential sectors in particular. New entrants are also expected in the Irish investment market this year.