Double-digit commercial rent rises should become a thing of the past this year

DESPITE A PREDICTED slowdown in rent increases, the Irish commercial property sector has been tipped for another busy year.

A new analysis for 2017 by commercial property specialists CBRE Ireland predicts that political upheaval will lead to reduced interest in offices from US firms – but also a pick-up in demand from UK businesses looking to relocate staff.

CBRE Ireland managing director Enda Luddy said the Brexit vote result would “for the most part” be negative for the Irish economy, with the exception of the commercial property sector “if anticipated Brexit-related relocations from London materialise” as expected this year.

Nevertheless, the company predicts increases in office rents to slow down significantly after double-digit rises in 2016.

CBRE Ireland expects the going rate for prime offices to increase only 1.6% this year, while prime retail rents are forecast to rise 7.9% – below the 11% jump in prices during 2016.

Rents in the industrial sector are predicted to shoot ahead, increasing 13.9%, although that is still well below the 25% increase seen last year.

Hotel slowdown

After several bumper years for sales, transactions in the hotel sector are expected to fall in 2017.

Last year, 66 hotels in Ireland changed hands, with sales totalling €805 million. It was the third year running in which more than 60 hotel deals were concluded.

However, there may still be some blockbuster deals to come in the capital as hotel owners look to cash in on properties while there is a shortage of tourist accommodation.

Meanwhile, sales activity in the pub sector is expected to rise. Up to 40 properties in the capital are tipped to be sold in the next 12 months, according to CBRE Ireland.

New offices

At the end of last year, CBRE revealed that office space in Dublin was being snapped up at levels that hadn’t been seen since the Celtic Tiger.

In today’s report, the property firm noted that last year saw the first significant increases in new office supply for more than five years – and that 2017 will continue that trend.

During the coming year, over 700,000 sq ft of new office space is due for completion in the capital – although a quarter of that new supply has already been let.

The CBRE analysis also predicted:

• Some semi-state organisations would offer sites for sale over the course of the next 12 months
• The average price of a Dublin pub in 2016 was €1.44 million. This is expected to rise further this year
• It is expected that some new Irish real estate investment trusts, focusing primarily on development and asset management, will emerge in 2017
• There will be increased appetite for sites for student accommodation.