Download Property Watch Q4 2015

Property Watch Q4’15
From Property Industry Ireland, the most influential property organisation in Ireland
Inside this Issue:
Housing commencements reached
just over 8,000 in 2015, but up
from a low base
+19%
Highest level of take-up
in Dublin office market
since 2007
c.250,000m
2
Another record year for
property investment
€3.5bn
AIB is supporting new homes development
AIB, through the Land & Development team in the Property Lending Unit and through their network
of New Business Centres, is currently supporting the development of in excess of 1,400 residential units.
Special Report
IDA Ireland on the property industry’s role in securing Foreign Direct Investment (FDI).
Introduction
No matter which
parties form the next
government, property
should be top of
their agenda
Mario Cuomo, the Democratic governor of New York in
the 1980s and 1990s famously said that the politician
campaigns in poetry and governs in prose.
This second edition of Property Watch is published at
a moment in Irish political life when the poetry of the
manifesto is being negotiated into the hard text of a
programme for government.
The tone and content of that programme for government –
if a consensus between the parties to govern can be
made – will shape the economy and the property sector
which it serves for the next five years.
If the incoming government needs some guidance
where it should focus its attention on building sustainable
economic growth, a look at the data in this report would
be a great starting point.
Nonetheless, there is much still to be done if the Irish
property sector is to play its part in delivering real
economic growth, attracting further investment into
Ireland and ensuring an increased supply of high quality,
affordable housing.
This report is part of PII’s commitment to provide the
industry and wider community with evidence-based
research underpinned by the highest standards of
transparency to help everyone make better, more
informed decisions.
As always, feedback is important, so please do let me
know if you have ideas for improvements for future editions.
Dr Peter Stafford
Director, Property Industry Ireland
There is no doubt that activity is increasing in the Irish
property sector. Whether the measure is residential
sales, commercial property investment or housebuilding, the indicators look more positive than they
have done in the past.
2
Property
Overview
The recovery in the
commercial property
market gathered
momentum in 2015
There was strong activity in the Dublin office market in
2015 as take-up reached its highest level since 2007.
As a result, rents in Dublin came under pressure, with all
agents reporting double-digit growth in prime rents over
the year. Similarly take-up in the Dublin industrial market
reached its highest level since 2006, spurred on by
strong demand from multinationals and pharmaceuticals,
as well as a growing online retail sector. The recent
record levels of take-up experienced in both the office
and industrial sectors reflected the economic recovery
and the growing employment base, with over 44,000
additional jobs created last year, 52 per cent of which
were in the Dublin region.
However, with the jobs recovery less prevalent outside
Dublin, the performance of the core commercial urban
markets outside Dublin was less favourable. That said,
demand was strong for good quality Grade A office
space, with a shortage of same now emerging in
Galway, Limerick and Cork. In the retail sector, the
rebound in consumer sentiment and retail spending is
boosting demand from both overseas and international
retailers for well-located stores across the country.
As transactions absorb the available office space in
Dublin and rents continue on an upward trend, the
return of cranes to the Dublin skyline signalled a
resumption of office construction activity in the Capital
during 2015. This is a welcome development and will
help to sustain the economic recovery, although much
of the supply in the pipeline may not come on-stream
until 2017 or later. However, the extent of development
in the pipeline has led to some agents raising concerns
about oversupply in the medium-term. There is also
evidence of some prime movers embarking on industrial
development activity in Dublin for the first time since
2007, although the quantum is limited and the expectation
is that industrial rents and capital values will rise
further this year.
The continued shortage of housing supply, particularly
in Dublin, is having adverse repercussions for those
looking to rent accommodation, with Dublin rents
continuing to rise strongly. The trend in house prices is
perversely the opposite as Dublin house prices declined
modestly in the latter months of 2015. However outside
of Dublin, residential property price inflation last year
was almost double the corresponding rate in the
previous year. Whether these trends continue, will
largely depend on the outcome of the forthcoming
review of the Central Bank’s macroprudential rules over
the summer. The key challenge for the next government
is without question the lack of supply right across the
social, rented and owner occupied housing sectors.
Until such time as the supply side issue is addressed,
accommodation pressures for those entering the jobs
market could well undermine the economic recovery.
It seems the ongoing appetite for Irish property from
domestic and foreign investors continues to surprise
as 2015 delivered another strong year in terms of
investment activity, both with respect to loan and asset
sales. The total investment in Irish property assets
(excluding loan sales) reached approximately €3.5 billion
in 2015. The expectation amongst all property agents
for 2016 is that a new phase will emerge in the
investment market, characterised by a slowdown in
deleveraging activity, and an increase in secondary
trading of those assets purchased over the last number
of years, as those investors look to generate income
from their existing assets but also consider
development and refurbishment opportunities.
Annette Hughes,
Director, DKM Economic Consultants
3
Latest
News
The last five
years from
PII's perspective
On reaching PII’s fifth birthday, it is a good
opportunity to review PII’s policy agenda since
2011 and discuss many of the issues which
have brought industry and government together.
2011
2012
On 2 July, the Irish Times announced that major players
in property and construction were intending to launch a
lobby group having “set aside their own narrow interests
in a bid to aid a recovery in the property sector, which,
in turn, would boost economic recovery.”
In April, PII warned of a dearth of commercial office
space in growth areas. While investment in Ireland by
Google, Bank of New York Mellon, Citigroup, Facebook,
Eli Lilly, PayPal and MasterCard was good news for Ireland, a shortage of high quality office space was a
looming problem for economic growth.
PII’s first report showed that construction output in
Ireland related to about 5.9 per cent of GDP in the first
quarter of 2011. The European average was 11.2 per
cent. Bridging that gap would need huge public
investment but such an investment would have an
immediate economic dividend in job creation.
Among the objectives outlined in PII’s first policy
document was support for the Government’s recent
jobs initiative and for green economy projects,
including energy efficiency retrofitting.
A funding group was established by PII to find alternative
funding mechanisms for projects and to try to source
working capital, first-time buyer mortgages and
investor finance packages.
The new organisation committed itself to provide
“constructive input” to ensure Nama’s “long-term
positive impact on economic recovery”, and planned
to provide a policy input to the review on upward-only
commercial rental leases.
This group very quickly worked with other stakeholders
to promote legislation to create Real Estate
Investment Trusts.
A 2012 report by PII said that “development must be
sustainable and is only a means to an end: the provision
of sustainable employment for those who live and work
in what is built.”
On 2 July, PII launched its Planning a Better Future
report. Amongst its 67 recommendations for reform,
it recommended that local authorities with planning
powers should be cut from 88 to 34, with all borough
and town councils abolished, The report said a
“redefined planning system…should put aside past
mistakes and put in place a robust, professionally
competent and publicly supported planning process”
that would contribute positively to the regeneration
of Ireland’s economy.
It wanted the National Spatial Strategy (NSS) to be
revisited, with “an immediate re-evaluation of the
number of identified gateways and hubs”, saying that
the 2002 strategy “has failed to meet its initial objectives
[and] remains largely aspirational”. While recognising
there would be “difficult political barriers” to be overcome
in revising the NSS, the report sought a “justified and
quantified prioritisation” of the nine gateways and nine
hubs designated for development 10 years ago.
4
2013
2014
2015
In mid-2013, PII warned that a “potentially serious
problem of undersupply” was emerging in areas of
the property market and the position was not likely to
change until new development is started. It warned
that the State and policy-makers were still looking
backwards about the oversupply of property in some
areas, but this focus on over-supply of some property
meant it was easy to miss the looming crisis in the
lack of new product on the market.
The 2014 PII Conference focused on Making Cities
Work. Guest speakers included Sir Edward Lister, the
deputy mayor of London for planning and infrastructure.
The conference covered themes such as investing
in sustainable cities, urban geography and
spatial development.
In February, chairman of the PII Market Supply and
Demand Committee Mark FitzGerald wrote an opinion
piece in the Irish Times in which he said: “In the same
way that we can’t have democracy without politicians,
we can’t have development without developers.” He
warned that the new Central Bank mortgage rules were
likely to suppress development in the centre of Dublin
and “ultimately the policy is likely to encourage
development in Kildare, Meath and Wicklow.”
Late in 2013, Property Industry Ireland published its
National Property Strategy which urged the Government
to encourage professional long-term investment into
the private rented sector and extend into next year the
seven-year capital gains tax exemption for such purchases.
The pre-budget submission focused on the need to
accelerate an existing programme of selling surplus
State property by €250m to fund up to 5,500 new
social houses and aid the Government in its pledge
to end homelessness by 2016.
PII said that cutting the windfall tax on property that is
rezoned from agricultural use to residential to the
standard 33 per cent rate, from its current 80 per cent
level, would help speed up the supply of suitable land. It
also called for a time-limited reduction on the VAT rate
on the construction of residential property to 9 per cent,
from 13.5 per cent.
In early 2015, PII made a detailed submission to the
Central Bank of Ireland warning of the impact of the
proposed lending rules on the supply of new homes
and the potential to cause a significant increase in
rents. The PII Submission recommended the graduated
introduction of lending rules which could be responsive
to changes in the market, have different rules for
different types of mortgage-holder and recognise the
potential second-round impact of the policy on the
rented sector and the delivery of new urban homes.
On the same day that the Housing Agency warned that
only half the required number of homes would be built
in 2015, PII published its budget submission. PII
sought “targeted tax measures”and It argued that the
Government should change housing standards rules to
encourage investment in purpose-built student halls
of residences.
According to the submission: “This should include
making student housing a separate property type in
planning and design regulations to encourage
development of halls of residences in brownfield or
under-developed urban areas.”
The planning process should be accelerated, with local
authorities required to rule on planning applications for
housing developments and social housing projects
within six weeks of receipt of the application.
5
Economic
Outlook
2015 was an excellent
year for the Irish
economy but caution
is needed
The Irish economy experienced spectacular growth in
2015. The combination of favourable exchange rates,
weak oil prices and low interest rates benefited Ireland
more than any other EU country. While final year
figures for 2015 are yet to be released, given the
strong performance of government tax receipts and
employment in the latter part of the year, Ibec expects
that GDP growth for 2015 should be 7.1%. This would
be the highest growth rate experienced by Ireland in 15
years, making it the fastest growing economy in the EU
for two years running. Growth in previous years was
heavily concentrated in certain sectors and regions, but
2015 was a turning point with notable improvements
made throughout the economy.
Given the weak euro, exports grew significantly in 2015
but the primary reason why growth in 2015 exceeded
initial expectations was the strong recovery in domestic
demand. Investment is estimated to have grown by
27.2% while consumer spending is expected to be up
by 3.7% in 2015. This strong growth in consumption
reflects improvements in wages and employment.
Disposable income in the first nine months of the year
was up 9% over the same period in 2014.This was
reflected in higher consumer activity, but not all of this
additional income was spent as savings grew at a
faster rate over the period.
This strong growth was also accompanied by a stellar
performance in the public finances. Tax receipts for
2015 were €3.3 billion ahead of target, reflecting the
buoyancy in both the domestic and export sectors of
the economy. Much of this additional revenue was due
to an overshoot in corporate tax receipts but this
combined with strong economic growth has meant
that government has reduced the budget deficit and
exceeded initial fiscal targets.
This upswing in the economy has also been reflected
in employment figures, as 2015 saw the creation of
roughly 50,000 jobs. This has caused the unemployment
rate to fall from double digits at the beginning of the
year to less than 9%. While this job growth is now being
seen across all regions (barring the West), the pace of
this recovery differs greatly amongst them. Employment
in Dublin is currently growing by 5% annually compared
to 2% in the rest of the country. This will increase pressure
on housing and infrastructure in Dublin in the short term
and exacerbate regional inequality long-term.
While it would be difficult to beat last year’s exceptional
performance again in 2016, growth this year is still
expected to be strong. The weak euro and low oil prices
are temporary but they are showing little sign of abating
in 2016. The continued improvements in the labour
market should also have a positive impact on incomes
and consumer spending. Early indicators for January
already suggest that last year’s momentum is likely to
continue with the unemployment rate as low as 8.6%
and tax returns up 7.3%.
That said, there are some serious downside risks to
which the economy is exposed. While the Irish economy
has benefited from favourable movements which are
outside of our control, other economies haven’t been
as lucky. The global economy is showing signs of a
slowdown and this is particularly evident in emerging
market economies. Therefore, these transitory gains to
Ireland should be viewed with caution. Losses to our
overall competitiveness elsewhere in the economy will
leave Ireland very exposed once these temporary
factors recede. One such weakness in Ireland is the low
level of investment, which is currently at its lowest level
in recorded history. While private investment has been
strong, public investment fell by 57% in the past seven
years. This underinvestment in education, transport and
other areas of the economy are now at risk of derailing
growth in the economy. Without investment, world
class education facilities, improved transport and a
greater supply of affordable housing, this spectacular
growth might disappear as quickly as it came.
6
Irish GNP and Components Annual YoY% Change
2014
2015(E)
2016(F)
Consumer spending
2.0
3.7
4.4
Government spending
4.6
1.4
3.1
Investment
14.3
27.2
13.1
Exports
12.1
13.7
9.1
Imports
14.7
15.9
11.5
GDP (Volume)
5.2
7.1
4.3
GNP (Volume)
6.9
5.9
4.4
GDP (Value)
5.3
11.7
7.2
Source: CSO, Ibec Forecasts. E = Estimate. F = Forecast.
Labour Market and Sectoral Employment (000s annual averages)
2013
2014
2015(E)
2016(F)
Agriculture
107
109
111
112
Industry
343
348
377
400
Services
1,430
1,453
1,473
1,506
Total
1,879
1,911
1,962
2,018
+2.4
+1.8
+2.8
+2.6
282
243
201
174
Employment growth (%)
Unemployed
Unemployment rate (%)
Labour Force
13.0
11.3
9.3
8.0
2,163
2,157
2,166
2,192
Source: CSO, Ibec Forecasts. E = Estimate. F = Forecast.
7
Residential
Market
Activity
Just over 8,000
units commenced
in 2015
The residential property market in Ireland remained in a
challenged position in the second half of 2015. Supply
continued to be constrained with commencements
dropping off to less than 1,800 units in Q4’15 from over
2,700 in the previous quarter. This is a concerning trend
as commencements had gained meaningful momentum
in both Q2 and Q3’15. Despite the drop-off in Q4’15,
and the latent lack of supply to the market in recent
years, total commencements for the second half of
2015 were more than double the total for the same
period in 2014 and were up, in annual terms, by
almost 19 per cent in the full year.
The number of residential units granted planning
permission also fell on a quarterly basis by 12 per cent
in Q3’15 (latest available), indicating a weak pipeline for
residential development. Within the total, the number
of houses granted planning was down by almost 300
units QoQ, albeit the number rose by 32 per cent YoY.
Cumulatively the total units (houses and apartments)
granted planning recorded a YoY increase of 24 per
cent, although from a low base. That said, just less than
11,000 units had planning permission in the year to
Q3’15, of which less than 1,500 were for apartments.
Completions (i.e. electricity connections) increased at a
robust quarterly rate of 14 per cent in Q4’15, generating
a total of 12,666 in the year, an annual increase of
almost 15 per cent. Although growing, completions
remain significantly below what is being commenced –
just over 8,000 in 2015 - implying the number of units
constructed will need to increase substantially over the
next two years to meet the excess demand for housing
that currently exists.
Property transactions in the final quarter of 2015
recorded mixed results, increasing at a quarterly rate
of 4 per cent but declining YoY by 22 per cent. Over
12,000 transactions occurred across the country in
Q4’15 and this represented the third consecutive
quarterly increase since market activity contracted
sharply in Q1’15. Around 45,000 (per DKM methodology)
residential property transactions occurred in 2015, an
increase of almost 7 per cent on the 2014 outturn.
Activity accelerated significantly across all counties in
the year, illustrating how the recovery in the residential
market is spreading out from Dublin and the other
urban centres.
As the Central Bank rules became fully bedded down
in the last quarter of 2015, it is interesting that the
numbers of mortgage drawdowns increased by 6.4 per
cent when mortgages involving a house transaction only
are included, compared with almost 16 per cent in the
previous quarter. The corresponding value increase was
4.2 per cent, down from 22.6 per cent the previous
quarter. Surprisingly loans to first-time buyers (FTBs)
were up by 4 per cent in Q4’15 but declined in YoY
terms by 5.4 per cent. However, the average FTB loan
at almost €171,500 was up by 2.6 per cent YoY.
The prevalence of cash buyers remained a feature of
the market in Q4’15, when the number of mortgage
drawdowns (8,103) is compared with total residential
transactions (12,065) in the quarter. The overall proportion
of cash buyers in 2015 was around 46 per cent.
On a regional basis, Dublin dominated residential
construction with over one-third of all commencements
arising in the Capital in Q4’15. Commencements were
weakest in the Midwest (Limerick, Clare and Tipperary)
and Midlands (Laois, Longford, Offaly and Westmeath)
with fewer than 100 commencement notices in each
region. The greatest proportion of completions arose
in Dublin at 22 per cent, but this was more closely
followed by the Southwest (17%) and Mideast (13%).
As 2016 gets underway and a new government is put in
place, the housing challenges across the social, private
rented and owner occupied sectors are likely to remain
very much to the fore for the foreseeable future.
8
Residential Market Activity
Q2’15
Q3’15
QoQ
YoY
Loan Approvals
Q2’15
Q3’15
Q4’15
QoQ
YoY
Units Granted Planning
3,010
2,662
N/A -12%
+24%
Total Number of Loan Approvals
7,576
7,965
7,124
-11%
-15%
- Houses
2,637
2,345
N/A -11%
+32%
- House Purchase
6,779
6,980
6,131
-12%
-20%
373
317
N/A -15%
-12%
- Top Ups/Remortgage
797
985
993
+1%
+53%
Total Loan Approval €m
€1,394
€1,465
€1,345
-8%
-12%
2,313
2,707
1,745 -36%
+65%
- House Purchase €m
€1,295
€1,338
€1,188
-11%
-18%
909
900
765 -15%
+48%
- Top Ups/Remortgage €m
€99
€128
€157
+23%
1+89%
1,157
1,492
859 -42%
-4%
Total Number of Drawdowns
6,250
7,292
8,103
+11%
+7%
- House Purchase
5,604
6,494
6,911
+6%
0%
Commencements
of which one-offs
Registrations*
Completions**
2,996
3,289
Transactions***
10,941
11,557
12,065
+4%
-22%
2,010
2,012
2,015
0%
0%
National Housing Stock (000s)
3,752 +14%
+16%
Mortgage Drawdowns
- Top Ups/Remortgage
646
798
1,192
+49%
+82%
Total Drawdowns €m
€1,085
€1,330
€1,452
+9%
+8%
- House Purchase €m
€1,005
€1,232
€1,284
+4%
+1%
€80
€98
€168
+71%
+133%
€166,237 €172,199 €171,486
0%
+3%
- Top Ups/Remortgage €m
FTB Drawdown - Average
0
0
0
Source: ww.environ.ie
*MidWest includes all of Tipperary
Source: www.environ.ie
*MidWest includes all of Tipperary
SouthWest
500
SouthEast
1,000
100
Dublin
200
100
MidEast
200
Midlands
1,500
West
300
Border
300
MidWest
2,000
SouthWest
400
SouthEast
400
Dublin
2,500
MidEast
3,000
500
Midlands
600
500
West
600
Border
3,500
MidWest
700
SouthWest
700
SouthEast
4,000
Dublin
800
MidEast
800
Midlands
Regional Transactions Q4’15
West
Regional Completions Q4’15
Border
Regional Commencements Q4’15
MidWest
- Apartments
Q4’15
Source: www.propertypriceregister.ie
MidWest includes all of Tipperary
*Registrations refer to the number of units registered with Home Bond and Premier Guarantee. **Completions are measured as connections to ESB. *** Transactions data excludes properties that are not full market price and those under €20,000 and over €5 million. QoQ refers to the latest quarter on quarter percentage change (Q4 on Q3). YoY refers to the latest year on year percentage change (Q4 2015 on Q4 2014). Loan Approval and Mortgage drawdown data from www.bpfi.ie.
9
Residential
Property
Prices
Little or no change
in asking prices
while sold prices
were mostly lower
in Q4
Reversal of trend in property price
growth as the rest of Ireland
overtakes Dublin
The two-speed recovery in Irish residential property
prices has seen a clear distinction develop between
Dublin and the rest of the country over the past number
of years, up to and including Q4’15. Dublin recorded the
strongest rates of price growth in previous years, as the
recovery took hold first in the Capital, before extending
to other regions around the country. However, this trend
has reversed to a remarkable degree in recent quarters
as price growth in the rest of Ireland has significantly
exceeded that recorded in Dublin. This is considered
to be a consequence of a delayed recovery outside
the Capital, combined with the effects of the Central
Bank’s lending rules.
This trend is illustrated in the range of house price
indicators included in the table opposite, where house
price inflation has recently been strongest in the rest of
Ireland. In terms of asking prices, Daft.ie reported that
property prices outside Dublin in Q4’15 were 13.1 per
cent ahead of the same period in 2014. This contrasts
strikingly with Dublin where house prices had risen by
only 2.7 per cent over the year. The CSO’s residential
price index, based on mortgage transactions, reflected
a similar scenario with prices outside Dublin rising by
10.2 per cent YoY in Q4’15, far in excess of the 3.5 per
cent growth recorded in the Capital. Finally, Daft.ie’s
data on the average sold prices across the country
provides further evidence of this trend with the mixadjusted annual average (MAAA) house price growth in
Dublin falling by 0.4 per cent YoY in Q4’15, considerably
lower than the robust growth rate of 7.6 per cent
recorded for average sold prices across the rest
of the country.
The Knight Frank Prime Dublin Residential Index, which
monitors the top 5 per cent of the residential
market by market value, comprising the very high end
of the Dublin residential property market, reported
modest growth of around 1 per cent in YoY terms.
The two speed recovery in residential prices which has
taken hold across the country has had a significant
effect on the rental market, particularly when considered
against the persistent lack of new housing supply.
Potential first-time buyers are now required to build up
larger deposits while mortgages are capped at 3.5 times
annual income, meaning that a substantial proportion of
the Capital’s first-time buyers now find themselves
having to rely on the rental market for longer periods
of time. This effect has been most severe in the
supply- restricted Dublin region where MAAA
residential rents in Dublin reached €1,435 in Q4’15,
according to Daft.ie, an increase of 8.2 per cent YoY.
Residential rents outside the Capital are considerably
more affordable but also increased at a significant rate
of 9.8 per cent YoY in Q4’15 to reach an average of
€727. The PRTB’s standardised rents portray a similar
picture for Q3’15, with rents in Dublin 8.7 per cent
higher than in the same quarter in 2014. Rents across
Ireland also rose by in excess of 8.5 per cent YoY
indicating how pressurised the rental market has
become in recent times.
On a quarterly basis, it became evident in Q4’15 that
growth in residential property prices was generally
slowing across Ireland. The MyHome National and
Dublin MAAA asking prices were flat in the quarter;
similar trends are evident from Sherry FitzGerald’s
National and Dublin price valuation indices. Daft.ie
reported a slight decline in asking prices QoQ on a
national basis, with sold prices also falling across
the country by 2.6 per cent in the quarter.
10
Residential Property Prices
ASKING PRICES
Average Sold Price by
County Q4 2015
Q2’15
Q3’15
Q4’15
QoQ
YoY
Daft.ie National MAAA* (€)
€202,155
€205,484
€204,175
-1%
+9%
Dublin
€380,507
Daft.ie Dublin MAAA* (€)
€310,842
€306,540
€306,613
0%
+3%
Wicklow
€309,263
Daft.ie National ex. Dublin MAAA* (€)
€160,418
€166,677
€164,838
-1%
+13%
Kildare
€254,976
MyHome National MAAA* (€)
€201,798
€205,024
€205,031
0%
+6%
Meath
€238,847
MyHome Dublin MAAA* (€)
€281,958
€286,089
€285,921
0%
+6%
Cork
€212,579
Galway
€179,447
Sherry FitzGerald: National (Index Q4 2001=100)
121.9
122.6
123.2
0%
+4%
Kilkenny
€178,569
Sherry FitzGerald: Dublin (Index Q4 1995=100)
403.3
402.9
402.9
0%
+1%
Kerry
€164,837
Louth
€163,719
Carlow
€156,750
(Index Dec 2012 = 100)
Wexford
€153,161
PRICES BASED ON MORTGAGE TRANSACTIONS
Laois
€141,308
NATIONAL PRICE VALUATIONS
Knight Frank Prime Dublin Residential
130.2
129.9
134.0
+3%
+1%
CSO National (Index 2005=100)
81.5
84.0
86.7
+3%
+7%
Sligo
€139,211
CSO Dublin (Index 2005=100)
83.1
85.3
86.6
+2%
+4%
Limerick
€138,520
CSO National ex. Dublin (Index 2005=100)
76.1
78.9
82.5
+4%
+10%
Waterford
€136,006
Monaghan
€135,997
SOLD PRICES
PPR National Average
€216,138
€236.783
€231,024
-2%
+9%
Clare
€135,656
PPR Dublin Average
€323,838
€388,188
€380,507
-2%
+13%
Tipperary
€123,887
PRR National ex. Dublin Average
€157,552
€168,523
€171,839
+2%
+14%
Westmeath
€119,687
Daft.ie National MAAA*
€193,243
€194,231
€189,171
-3%
+4%
Mayo
€116,272
Daft.ie Dublin MAAA*
€303,277
€307,558
€298,197
-3%
0%
Offaly
€111,018
Daft.ie National ex. Dublin MAAA*
€150,989
€150,712
€147,303
-2%
+8%
Donegal
€108,715
Cavan
€106,525
RESIDENTIAL RENTS
PRTB National Standardised Rents
PRTB Dublin Standardised Rents
Daft.ie National MAAA* (€)
Daft.ie Dublin MAAA* (€)
Daft.ie National ex. Dublin MAAA* (€)
€866
€901
N/A
+4%
+9%
Leitrim
€95,801
€1,244
€1,277
N/A
+3%
+9%
Roscommon
€89,886
Longford
€85,821
€934
€964
€979
+2%
+9%
€1,368
€1,409
€1,435
+2%
+8%
€694
€718
€727
+1%
+10%
* MAAA = Mix-Adjusted Annual Average
QoQ refers to the latest quarter on quarter change.
YoY refers to the latest year on year change.
*** Transactions price data excludes properties that are not full market price and those under €20,000 or over €5 million but includes VAT.
Source:
Property Price Register, DKM Analysis
*** Transactions price data excludes properties that are not full
market price, those under €20,000 or over €5 million and
includes VAT
11
Commercial
Office
Market
Oversupply not an
immediate concern
All of the property agents’ commentaries on the outturn
for 2015 report the strong uplift in the volume of office
market activity last year. In a market comprising a stock
of around 3.34m2 at the end of 2015 (DTZ SF), the total
take-up came in at an average of around 252,000m2.
This figure is based on estimates from five property
agents, which range from 224,700m2 (DTZ SF) to
270,400m2 (Lisney). While each agent reports somewhat
different historical figures for each year, there is a
general consensus that the 2015 take-up level was the
highest annual level since 2007. A number of agents
compare the 2015 outturn with trends historically,
notably the five year average annual take-up in Dublin of
266,630m2 (JLL), the ten year average annual take-up of
177,000m2 (CBRE) and the long-run annual average of
145,850m2 (DTZ SF) over the last nineteen years.
In terms of Q4’15, all five agents with the exception
of DTZ Sherry FitzGerald, reported higher take-up
compared with the previous quarter. The increase was
almost 100 per cent, according to Lisney. There were
five large transactions in Q4 in excess of 5,000m2. The
IT sector dominated the market, accounting for the two
largest transactions in the quarter. The first was to the
technology company, Workday, which has agreed to
lease around half of the space in the Kings Building at
the rear of the Four Courts. The company is reported to
have negotiated a rent of €269 per m2 (€25 per sq ft) for
8,815m2 under a 10-year lease. The second was to Twitter, which is to move into the 10,405m2 Cumberland
House later this year, following a €27 million refurbishment
by Hibernia REIT, who acquired the building in March
2015. Twitter is reported to be taking a 20 year lease
on the majority of the building, with tenant-only break
options after 12 and 15 years, and to be paying rent
of €538 per m2 (€50 per sq. ft).
Take-up in Dublin city centre totalled 138,360m2 on
average across five agents, ranging from 78,900m2
(DTZ Sherry FitzGerald) to 172,200m2 (CBRE),
corresponding to 55 per cent of the total average
take-up take up across Dublin last year. Ongoing supply
constraints in Dublin city centre are reported to have
shifted occupier demand to the secondary and suburban
markets, with the south suburbs being the most
sought after location.
Three agents reported a decline in the overall Dublin
office market vacancy rate again in Q4 to between 8
and 9 per cent (CBRE, JLL, KF), while two agents
reported a year-end vacancy figure between 11 (Lisney)
and 13 per cent (DTZ SF).
While the lack of supply is particularly acute in the
South Docks Area, a number of agents have raised
concerns about oversupply in the Dublin office market.
Estimates vary of the volume of office space under
construction at the end of 2015, ranging from
209,950m2 (DTZ SF) to 270,000m2 (in 23 office
schemes, CBRE) to close to 280,000m2 (JLL). Excluding
the Space which has been pre-let, suggests there are in
the region of 170,000m2 left to meet demand over
the coming years.
In the city centre, Lisney have reported that there are 12
office schemes or extensions to existing buildings under
construction, comprising a total of 103,500m2 of new
accommodation. Excluding pre-lets, Lisney suggest
there are 43,700m2 available in the city centre, which is
substantially short of the quantum of take-up in 2015,
implying any immediate concerns about oversupply
are not justified.
Thus, while oversupply is not considered to be an
immediate concern, there is significant development in
the pipeline, with another 40 schemes planned for the
city centre alone, totalling in excess of 560,000m2,
albeit not all of these will proceed to construction,
according to Lisney.
A number of agents suggest that 2016 is more likely to
be a year characterised by a reduction in good quality
space in the city centre, resulting in little choice for
tenants and further rent increases, with tenants forced
to look to the suburbs for space. This is expected to
generate faster growth in rents in the suburbs compared
with the city centre, a trend which may already
be happening.
12
Snapshot of Dublin Office Property Market Indicators
Dublin Take-Up (‘000m2)
Dublin Vacancy Rates (%)
Q2’15
Q3’15
Q4’15
YTD
Q2’15
Q3’15
Q4’15
QoQ
CBRE
83.7
51.7
75.2
249.0
CBRE
10.2
9.3
8.7
-0.6pp
DTZ Sherry FitzGerald
26.8
86.8
45.0
224.7
Sherry
DTZ
Sherry
Fitzgerald
FitzGerald
14.1
14.9
-0.9pp
13.4
-0.9pp
13.0
-0.9pp
-0.4pp
JLL
88.7
55.8
90.8
266.9
JLL
10.2
8.7
-0.9pp
7.9
-0.9pp
7.8
-0.9pp
-0.1pp
Knight Frank
68.8
50.5
87.5
248.2
Knight Frank
11.8
10.5
8.8
-1.8pp
Lisney
82.0
45.8
91.6
270.4
Lisney
13.3
13.1
11.2
-1.9pp
CBRE
8.5
7.46
6.76
-0.7pp
DTZ Sherry FitzGerald
8.5
9.2
8.9
-0.3pp
Dublin City Centre Take-Up (‘000m2)
CBRE
Dublin City Centre Vacancy Rates (%)
62.2
33.0
53.1
172.2
7.6
21.1
11.8
78.9
JLL
55.8
25.5
54.5
149.6
JLL
5.3
4.6
3.7
-0.9pp
Knight Frank
40.1
18.1
46.6
124.5
Lisney
11
10.8
9.3
-1.5pp
Lisney
54.8
26.5
58.8
166.6
Dublin CBD Vacancy Rates (%)
CBRE
6.2
5.4
5.24
-0.2pp
N/A
DTZ Sherry FitzGerald
8.5
9.2
8.9
-0.3pp
9.4
8.9
7.8
-1.1pp
DTZ Sherry FitzGerald
Dublin Vacant Stock/Availability (‘000m2)
DTZ Sherry FitzGerald
496.6
JLL
Lisney
447.7
435.1
315.9
272.2
268.9
N/A
Lisney
474.0
463.6
396.2
N/A
Dublin Office Yields (%)
Q2’15
Q3’15
Q4’15
QoQ
CBRE
4.80
4.70
4.65
0.0pp
CBRE
538
565
592
5%
DTZ Sherry FitzGerald
4.25
4.25
4.25
0.0pp
DTZ Sherry FitzGerald
530
555
592
7%
JLL
5.00
4.50
4.50
0.0pp
JLL
592
592
592
0%
Knight Frank
4.50
4.50
4.50
0.0pp
Knight Frank
552
592
619
5%
Lisney
4.30
4.20
4.25
0.0pp
Lisney
424
456
N/A
SCSI IPD
7.40
6.40
5.60
-0.8pp
CBRE
538
565
592
5%
DTZ Sherry FitzGerald
530
555
592
7%
JLL
592
592
592
0%
Knight Frank
552
592
619
5%
Lisney
560
570
592
4%
Dublin City Centre Rents (€/m )
2
Dublin Prime Rents (€/m2)
QoQ refers to the latest quarter on quarter percentage or percentage point change (Q4 on Q3). YTD refers to year to date, i.e. four quarter to 2015.
13
Commercial
Property
Market
Multinationals a key
driver of industrial
demand while UK
and international
brands look to key
retail locations
The strong demand for industrial
space in Dublin continues
All indicators point to a
busy year for retailers
The last quarter of 2015 saw a remarkable level of
take-up in Dublin varying from 86,000m2 (Lisney) to
115,579m2 (CBRE). This brought the total take-up in
2015 to between 391,000m2 (JLL) and 428,100m2
(CBRE). This implies an average take-up last year of
around 408,000m2 which is only the fourth time in 21
years that industrial take-up has reached 400,000m2 in
Dublin (Lisney). Using JLL’s figures, the total take-up in
2015 exceeded the previous 2014 peak of 271,405m2
by 44 per cent.
There are several positive trends emerging in key
indicators which will drive a greater level of activity in the
retail property sector. An upward trend in the KBC/ESRI
Consumer Sentiment Index during 2015 was encouraging,
while there was also an 11.4 per cent YoY increase in
domestic demand in Q3 2015. Total employment was up
by 56,100 in the year to Q3 2015, and the growth in retail
sales volumes accelerated to 8.3 per cent in 2015.
Within the year there were 12 very large transactions
exceeding 7,000m2 (Lisney) which represented approximately
one third of the total activity, indicating that the high
industrial take-up in Dublin in 2015 was highly influenced
by a few very large transactions. Multinational corporations
have had a particularly large effect on industrial take-up
in Dublin (Lisney). Activity during Q4’15 was focused
around Dublin South West which accounted for 49 per
cent of total take-up in Dublin (JLL).
However throughout 2015 the supply of modern industrial
space in prime locations has decreased rapidly.
Additionally the limited number of construction projects
currently in progress forced industrial prime rents
upward to between €75 (CBRE) to €78 (JLL) per m2 in
Q4’15. Rents are expected to continue to increase into
2016 and beyond as growing demand exceeds supply
(CBRE). The available supply decreased throughout
2015 to below 950,000m2, the lowest level since 2009,
resulting in the Dublin vacancy rate falling
to an estimated 15 per cent (Lisney).
2016 looks set to be another strong year with companies
linked to online retailing distribution, pharmaceuticals
and data centres (JLL) expected to drive demand.
Overall the industrial sector is recovering fast. The
continued supply quality issue and lack of new
construction will drive up industrial rents and decrease
the vacancy rate, but this should also encourage
investors and contractors to start building again.
Reports suggest that the retail property market is
experiencing increased demand from both domestic and
overseas retailers, with that demand spreading out
beyond prime city areas. The very significant Project
Jewel retail portfolio transaction in the latter half of 2015
may result in others looking to the Irish market for retail
investment opportunities. Indeed DTZ Sherry FitzGerald
suggest that retail accounted for 27 per cent of the
overall property investment turnover in 2015 with around
€1 billion of retail property changing hands.
Overall retail rents rose by 10.4 per cent in 2015 (Lisney).
However, serious challenges remain outside of Dublin,
most notably in the Connacht/Ulster region, where prime
rents declined by almost 36 per cent in 2015, according
to the Society of Chartered Surveyors (SCSI Property
Review & Outlook 2016). That said, CBRE expects the
highest growth in rental value during 2016 to take place
outside of the core Dublin market.
A key challenge in 2016 will be finding retail premises for
retailers interested in high street locations or in sought
after schemes, many of which are reported to be close
to or at full occupancy.
The volume of new retail development activity is substantially
behind what is going on in the office market. However,
construction is expected to get underway at the Frascati
Shopping Centre redevelopment in Blackrock in 2016
and the planning application for the retail-led town centre
in Cherrywood will be submitted this year, with construction
expected to commence towards the year-end. A number
of retail refurbishment schemes are also expected to
commence this year.
14
Snapshot of Dublin Industrial Property Market Indicators
Dublin Take-Up (‘000m2)
CBRE
DTZ Sherry FitzGerald
Q2’15
Q3’15
Q4’15
YTD
98.2
128.0
115.6
428.1
112.5
127.7
N/A
JLL
87.9
91.2
97.5
390.9
Lisney
81.3
137.2
86.0
405.3
1,113
1,046
N/A
Q2’15
Q3’15
Q4’15
QoQ
CBRE
70.0
72.5
75.0
+3%
DTZ Sherry FitzGerald
75.0
75.0
75.0
0%
JLL
70.0
70.3
78.0
+4%
Lisney
74.0
75.0
75.0
0%
27.4
25.8
N/A
CBRE
6.50
6.30
5.75
-0.55pp
DTZ Sherry FitzGerald
6.25
6.00
5.75
-0.25pp
JLL
7.00
7.00
6.00
-1.00pp
Lisney
6.00
6.00
5.90
-0.10pp
SCSI IPD
8.00
4.80
5.70
+0.90pp
Dublin Vacant Stock/Availability (‘000m )
2
DTZ Sherry FitzGerald
Dublin Prime Rents (€/m )
2
Dublin Vacancy Rate (%)
DTZ Sherry FitzGerald
Dublin Yields (%)
QoQ refers to the latest quarter on quarter percentage or percentage point change (Q4 on Q3). YTD refers to year to date i.e. four quarter to 2015.
15
Commercial
Regional
Market
Mixed signs
of recovery
Information on the regional property market in the main
urban areas - Cork, Galway and Limerick - is based on
data provided by DTZ Sherry FitzGerald. There is
further information available from Lisney on the Cork
property market.
At the outset it is noted that the stock of office
accommodation across the three markets was 1.175
million m2 at the end of 2015, which corresponded to 35
per cent of the total stock in the Dublin market. Cork had
the largest stock of office accommodation (549,000m2)
followed by Limerick (324,350m2) and Galway
(301,750m2) at the end of 2015, according
to DTZ Sherry FitzGerald.
The disparity in terms of vacancy rates is significant
with Limerick’s vacancy rate over four times the
corresponding rate in Galway. Vacancy rates at the end
of 2015 were marginally higher in Cork (15.6%), marginally
lower in Galway (4.5%) and unchanged in Limerick
(18.5%) compared with the previous quarter.
Prime rental levels ended the year unchanged in Cork
and Limerick at €250 per m2 and €172 per m2
respectively, although rents closer to €280 per m2 were
achieved in Cork city centre. DTZ Sherry FitzGerald are
projecting rent increases across the board in 2016, with
rents per m2 expected to rise to €200, €245 and €285 in
Limerick, Galway and Cork respectively.
With recovery in the economy and the jobs market
beginning to spread out to other urban areas, signs of
a pick-up in activity in the regional property markets
should be emerging. However a review of the total
take-up of office accommodation shows all three
markets recorded a decline in Q4 compared with Q3,
with take-up levels substantially higher in the first half of
2015 in Cork and Galway. Over the full year, the total
take-up was highest in Limerick (29,300m2) and lowest in
Galway (17,100m2). In contrast Lisney reported a higher
level of take-up in Cork in Q4’15 compared with the
previous quarter, which they partly attributed to an
active multinational sector, culminating in a total
take-up of 19,310 m2 for 2015 as a whole.
In terms of construction activity, a total of 33,750m2
were under construction across the three counties at
the end of 2015. The largest quantum was in Cork
where the main development consists of the 15,793m2
new office scheme at One Albert Quay in the city, which
is set to be fully-let on completion over the coming
weeks. Its tenants include PWC, Investec Bank, Arup,
the internet security firm Malwarebytes and Ardmore
Shipping Corporation. The recent commencement of the
mixed-use development of 11,782m2 at the Capitol
Cinema site on the Grand Parade in the city, which is
expected to include around 3,100m2 of Grade A office
space, is expected to be completed in February 2017.
DTZ Sherry FitzGerald reported the second highest level
of take-up on record in Limerick and significantly above
the long-run average. The exceptional take-up in Q3’15
reflected the occupation by Analog of around 13,050m2
in Raheen, County Limerick.
Shortage of industrial buildings in the
most sought after locations in Cork
A total of almost 166,000m2 of space was available
across the three counties at the end of 2015. The
available stock situation was exceptionally tight in
Galway at the year-end. The proportionate split of total
accommodation available in 2015 between the city
centre and the suburbs was 48/52 in Galway, 40/60
in Cork and 45/26 in Limerick, with the balance
of 29 per cent in the Shannon Free Zone. Around 83
per cent of the available space in Cork was Grade A
accommodation, of which almost two-thirds was in
the suburbs.
There is limited Q4’15 information available on the
industrial market outside of Dublin apart from research
on the Cork market by Lisney. The latter reported total
take-up in 2015 of 37,070m2 which was supported by a
strong export sector. There was an available industrial
building stock of 217,000m2 at the end of the year and
with no new construction underway, this figure can be
expected to fall over the coming quarters. The vacancy
rate was 17.4 per cent at the end of 2015, down from
18.2 per cent one year earlier. Industrial rents were
reasonably stable, according to Lisney, at in the region
of €43 - €48 per m2.
16
Regional Market Indicators
INDUSTRIAL
OFFICES
Q2’15
Q3’15
Q4’15
YTD
19,310
9,940
11,000
5,750
37,070
22,100
13,250
45,000
N/A
2,250
17,100
7,650
24,750
N/A
16,900
5,700
29,300
11,700
55,800
N/A
93,700
97,000
95,000
233,000
220,160
217,000
86,850
84,650
85,550
169,700
156,050
N/A
Galway
22,450
13,900
13,600
42,700
43,600
N/A
Limerick
75,750
71,200
66,800
209,000
176,950
N/A
Q2’15
Q3’15
Q3’15
QoQ
Q2’15
Q3’15
Q4’15
Cork
245
250
250
0%
50.0
50.0
N/A
Galway
215
215
220
+2%
43.0
43.0
N/A
Limerick
150
172
172
0%
38.0
38.0
N/A
Cork Overall
15.8
15.4
15.6
+0.2pp
Cork City Centre
19.2
16.1
16.2
+0.1pp
Cork Suburbs
13.7
15.0
15.2
+0.2pp
Galway Overall
7.4
4.6
4.5
-0.1pp
Galway City Centre
9.2
4.9
5.5
+0.6pp
Galway Suburbs
6.3
4.4
3.9
-0.5pp
Limerick Overall
20.8
18.5
18.5
0.0pp
Limerick City Centre
21.9
18.8
16.8
-2.0pp
Limerick Suburbs
16.9
13.7
14.5
+0.8pp
Limerick Shannon Free Zone
24.4
26.7
29.7
+3.0pp
TAKE-UP (m2)
Q2’15
Q3’15
Q4’15
YTD
Cork*
5,990
3,570
4,880
Cork
5,750
5,300
1,550
Galway
3,800
2,700
Limerick
2,750
Cork*
Cork
VACANT STOCK/AVAILABILITY (m2)
PRIME RENTS (€/m )
2
QoQ
VACANCY RATE (%)
CORK
GALWAY
LIMERICK
*Source is Lisney. All other data is from DTZ Sherry FitzGerald.
QoQ refers to the latest quarter on quarter percentage of percentage point change (Q4 on Q3). YTD refers to year to date i.e. four quarter to 2015.
17
Investment
Market
2015 records the second
highest turnover of
commercial real
estate investment
It seems the ongoing appetite from domestic and foreign
investors for Irish property continues to surprise as 2015
delivered another strong year in terms of investment
activity, both with respect to loan and asset sales.
Estimates for the total investment in Irish property
assets (excluding loan sales) achieved in 2015 range
from €3.4 billion (JLL) to €3.5 billion (CBRE) to €3.7
billion (DTZ SF and Lisney). Although lower than the
all-time record level achieved in 2014 (c. €4.5bn),
this figure is remarkable given the size of the Irish
economy. CBRE suggest that one-third of the total
spend in 2015 was from Irish investors, implying the
balancing figure demonstrates the level of confidence
international investors have in the Irish economy and
its future prospects.
An exceptional Q4’15 performance, with in the region of
€1.2 billion (JLL) to €1.4 billion (DTZ SF) of transactions
recorded, contributed to this remarkable outturn. An
interesting analysis on the geographical split of the
volumes traded in Q4’15 by JLL showed that 53 per
cent were in Dublin compared with 94 per cent in the
previous quarter. It remains to be seen whether this shift
in investment to outside of Dublin continues in 2016.
NAMA has made a significant contribution to the volume
of asset and loan sales, as it continued its deleveraging
activity during 2015. It has sold in the region of €27.2
billion of assets and loans since its inception, with close
to €19 billion in 2014 and €8.5 billion achieved in 2015.
The largest single transaction involving NAMA in 2015
would have been the Project Jewel loan portfolio sold
for almost €1.85 billion (nominal value excluding
discount), comprising loans relating to the Dundrum
Town Centre, the Ilac shopping centre (50% share), the
Pavilions shopping centre (50% share) and a 5.3 acre
development site in Dublin city. The portfolio was
acquired by the UK listed property company
Hammerson and Allianz Real Estate of Germany.
NAMA is reported to have a further €11.1 billion of
assets to sell in Ireland and sees the challenges in doing
so as comprising competition from secondary trading of
assets by private equity funds and from other European
markets, notably the recovering economies of Spain
and Italy, as well as economic and timing risks. It is
currently preparing to bring in the region of €6.5 billion
(outstanding debt balances) of real estate to the market
over the coming months comprising two loan portfolios,
Project Emerald and Ruby.
Green Property and Green Reit is selling a significant
retail asset, in the form of the Blanchardstown Town
Centre, which is expected to generate in excess of €1
billion. Green Reit is also disposing of the assets in the
Glas Portfolio, which consists of over 69,677m2 of
commercial space across 58 commercial units. Four of
the six properties are in Dublin: the Arena Centre in
Tallaght, which has 63 apartments and a 119 bedroom
hotel, the Ormond Office Building in Dublin City Centre,
Classon House in Dublin 14 and Parnell Car Park in
Dublin 1. The portfolio also includes the Globe Retail
Park in Naas and the Parkway Retail Park in Limerick.
The expectation amongst all property agents for 2016 is
that a new phase will emerge in the investment market,
characterised by a slowdown in deleveraging activity,
and an increase in secondary trading of those assets
purchased over the last number of years, as those
investors look to generate income from their existing
assets but also consider development and refurbishment
opportunities. Overall investment turnover is expected
to continue to fall to a more sustainable and normal
level, estimated by Lisney to be of the order of
€2 billion per annum.
18
19
Special
Report
In January 2016, IDA Ireland announced the highest
level of employment across its client companies in its
67 year history. Overseas companies now employ over
187,000 people across Ireland. All sectors and regions
have benefited with 53 per cent of all jobs created
located outside of Dublin.
The property industry’s
role in securing Foreign
Direct Investment (FDI)
These results represent the first year of IDA’s strategy:
Winning Foreign Direct Investment 2015-2019 which
sets ambitious objectives: - 80,000 new jobs, 900
investments, and €3bn in R&D investments and a strong
focus on winning Regional investments. The Property
and Construction sectors have a critical role to play in
supporting the delivery of these challenging targets.
Property and infrastructure availability is a clear differentiator
in the decision making process on where companies
locate their investments. Investments of note in 2015
included Apple and Facebook and their respective
plans to build data centres in Athenry and Clonee,
Regeneron’s expansion of its Limerick campus,
Pramerica's expansion in Letterkenny. West Pharma
also commenced site works in Waterford while ABEC
Inc. announced plans to expand its global operations
in Fermoy.
Many of the projects won in 2015 were capital intensive,
and provided strong additional benefits beyond the jobs
themselves. More than one-in-five private sector jobs in
the economy (direct and indirect employment) are as a
result of FDI investments, while overseas companies
continue to be significant exporters from Ireland. IDA
client companies also accounted for approximately
65% of all corporate tax receipts in 2014.
In the construction sector, FDI activity has generated
approximately 10,000 jobs and this positive trend is
likely to continue into 2016.
This special report was authored by Mary Buckley,
Executive Director, IDA Ireland.
For its part, IDA with the support of the Irish Government
has commenced the rollout of its 5 year €150 million
property investment programme to deliver flexible
and cost competitive site and building solutions in
designated regional locations. In 2015, IDA oversaw the
delivery of new office and manufacturing facilities in its
Business Parks in Athlone, Waterford, Letterkenny and
Galway and plans for 2016 include delivering building
solutions into Castlebar, Sligo, Tralee and Galway. IDA
remains committed to leveraging partnership opportunities
with developers and investors to deliver pre-permitted
buildings on IDA Business Parks in designated
regional locations.
Flexible and cost competitive building solutions remain
crucial. Every investment is hard won against ever
increasing competition from a growing range of
sophisticated and innovative global business locations.
We must not be complacent in this regard.
From an international perspective Dublin represents our
strongest hand as an international investment location.
It is home to the largest portfolio of FDI companies in
Ireland with some of Europe’s most vibrant business
clusters i.e. Financial Services and Technology sectors.
It is imperative that Dublin enhances its reputation and
remains attractive and the Dublin Office Market for FDI
remains critical in that regard.
The availability of talent remains the biggest driver for
IDA client companies in their international investment
location decisions, and the supply of quality and
affordable residential accommodation is thus a key
competitiveness factor. More private sector residential
development will be required to meet the demand of FDI
companies’ employees in some regional locations and
in Dublin City. IDA welcomes the recent announcement
by NAMA to fund the delivery of 20,000 residential units
by the end of 2020.
The ongoing supply of flexible and cost competitive
office solutions, spearheaded by the estimated c. 3
million sq.ft. of new office supply for Greater Dublin by
2018, is very welcome. Supply remains tight currently in
parts of the CBD where an ongoing, sustainable supply
is important. There is however a strong property offering
available and strong value to be had depending on the
location in Dublin.
It is positive to see the required proactivity by all key
stakeholders on this agenda at the present time. The
onus, in my view, is on us all to ensure that we maintain
and develop attractive locations for our people to live
and work, and we need a sustainable functioning
construction sector to support this.
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AIB’s
Specialist
Property
Lending
Unit
Supporting
Residential
Development
Paul C McNamara FSCSI FRICS
Head of Property Strategy &
MI Property Lending Unit
AIB Wholesale and Institutional Banking
*Department of the Environment,
Community and Local Government www.environ.ie
Allied Irish Banks, p.l.c. is regulated
by the Central Bank of Ireland.
It is now well accepted that currently the level of house
building in Ireland is falling well short of the numbers
needed to house both our existing households and to
meet the demands of new household formation.
In 2014 the number of housing units completed nationwide only amounted to 11,016* and in 2015 the number
of units completed nationally was 12,666*. When
contrasted to the numbers of homes that are likely to be
needed each year, it is no surprise that those wishing to
buy a home are finding the supply of new and second
hand stock to be very limited indeed.
Research by Sherry Fitzgerald shows that in July 2015
there was only 1.7% of the second hand private housing
stock on the market nationwide. This is considerably
lower than would be expected in a normally
functioning market.
AIB, through the Land & Development team in the
Property Lending Unit (PLU) and through our network
of New Business Centres is currently supporting the
development in excess of 1,400 residential units and
we are actively engaged in discussions with the
sponsors of over 800 further homes.
The Property Lending Unit is designed by the Bank to
be a centre of excellence and a number of property and
construction specialists have been recruited to support
the residential development lending activity of both the
PLU and the Business Banking teams. These specialists
include both Chartered Surveyors and Engineers who
work closely with our lenders and our customers.
AIB adopts a proactive approach to such development
opportunities and we see the relationship between
the bank and the customer as one very much of a
partnership to ensure the best outcome for both parties.
Early engagement by our lending teams with our
customers ensures that projects can be run efficiently
and smoothly and the focus is on progressing
developments efficiently to completion.
Projects the bank is currently supporting are varied and
include developments in the Greater Dublin Area such
as Hansfield, Rathgar, Kinsealy, Churchtown and
Swords and in Limerick city, Killaloe Co Clare and in
Cork city. These developments range from smaller infill
schemes to larger multi-phase developments involving
hundreds of homes.
AIB is delighted to be working with Capital Homes in the
delivery of Landen Park, Oldtown, Naas Co Kildare. This
is a development of 110, 4 bed detached and semidetached houses which are constructed to achieve A
rated energy efficiency standards and range in size
from 1,530 sq ft up to 2,050 sq ft.
Michelle Mullaney, Operations Director with Capital
Homes said of this development and their relationship
with AIB, “ In creating our vision for Landen Park
we have brought together a highly skilled team of
professionals all of whom have long-run experience
in residential development. AIB provided initial partfunding for Landen Park through the New Business
Team-East headed by Ray Lynch. Ray and his team
were supportive of the project from the outset and
proactively engaged with us to build a positive
working relationship”.
Landen Park is now well underway with over 40
homes now completed.
AIB is committed to working with capable parties to
deliver homes throughout all parts of the country where
demand is evident for the stock and the developments
can be shown to be economically viable.
The bank has structured itself to accommodate the
delivery of this funding in keeping with our brand
values of keeping it simple and making it easy for
our customers to engage with the right people and
teams in the bank.
As part of the bank’s full service provision, AIB is
particularly active in the provision of mortgages to
home buyers. As the mortgage market continues to
recover, with a 26% growth in 2015, AIB remains the
largest provider, growing by 32% and providing
mortgages to nearly 10,000 customers in 2015.
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Methodologies
CBRE Ireland work off standard definitions across EMEA to ensure consistency and facilitate comparison. Our definition of vacant stock is all stock that is being
marketed to let at the end of each quarter. Vacancy rate in turn is all available stock expressed as a percentage of overall stock at the end of each quarter. Grade A
vacancy rate refers to all Grade A stock expressed as a % of overall stock at the quarter-end. Take-up refers to all leasing activity in the office sector whereas our
definition of take-up also encompasses sales in the industrial sector. We analyse Dublin offices by collating stats by the following postcodes/districts; Dublin 1/3/7,
Dublin 2/4, Dublin 6/8, IFSC, North Suburbs, South Suburbs and West Suburbs. Our definition of city centre includes the postcodes of Dublin 1/3/7, Dublin 2/4,
Dublin 6/8 and the IFSC while our definition of CBD is Dublin 2/4 only. Prime rent refers to the prime headline rent being quoted in the market at a particular point in
time while prime yield refers to a net equivalent yield for a prime property let to a strong covenant on an FRI lease with 10 years unexpired and subject to open
market reviews (upwards and downwards). Contact: [email protected]
DTZ office take up records occupation of a building by a tenant. In a bid to avoid double counting and to accurately track net absorption rates, signed and reserved
space is excluded. Lease re-gears are also omitted. Industrial take up comprises letting and sales activity. Both office and industrial take up exclude investment
transactions. The vacancy rate for the Dublin office market is calculated excluding Georgian accommodation. The vacancy rate for the Limerick office market is
calculated excluding Georgian accommodation. The vacancy rate for the Cork industrial market excludes the South East and Ringaskiddy. The Central Business
District incorporates the prime area of Dublin city and extends to the IFSC and the North & South Docklands and prime fringes such as Ballsbridge.
Contact: marian.finnegan@sherryfitz.ie
In the Dublin office sector, the City Centre region is taken as – in the east, all areas from the Merrion Gates to East Wall Road; in the north, along the canal ring; in
the west, to Kilmainham; and in the south, along the canal to Ballsbridge and then all areas east of here to the Merrion Gates. For the purposes of this report, we have
taken the CBD to include the traditional core in Dublin 2 plus the docklands; those parts of Dublin 1 and Dublin 7 that are along the quays; and the parts of Dublin 4
and Dublin 8 that are adjacent to Dublin 2. Contact: [email protected]
The information is based on JLL primary data which is collected and analysed on a quarterly basis. Data is evidence-based and uses information from actual market
transactions during the quarter. Office stock comprises all Dublin stock constructed post-1960 and therefore does not include Georgian properties. Office demand is
recorded by using gross take-up levels for all deals (lettings and sales). This includes expansions, relocations, and new occupiers. JLL industrial take-up records the
letting and sales activity by occupiers of space that has been released onto the market. It does not include land sales, investment transactions or lease re-gears.
Prime rents represent the highest achieved rents for the best-quality (Grade A) properties in the core locations that were recorded for that quarter.
The yields reported are based on evidence from transactions and reflect the prime yields for each sector. Contact: [email protected]
The Sherry FitzGerald Barometer of second-hand house prices is an analysis based on a repeat valuation method. This index has been in place since 1996 for Dublin
and 1999 for the national market. It analyses trends in the second hand market only, based on an analysis of a basket of properties in all of our locations nationwide.
Each basket of properties was chosen based on a weighted profile of properties in each location. The basket extends to over 1,500 properties. The price of a sample
of properties that sold in a particular period is re-valued each quarter and these valuations are used to construct a house price index for existing houses. Repeat
valuation of a fixed sample of properties ensures that the mix does not change between time periods and it also provides live up to date market analysis, without any
lag which an analysis of mortgage drawdowns is subject to. It also facilitates an analysis of both the active and inactive elements of the market thereby giving a fuller
picture of market deflation. Contact: marian.finnegan@sherryfitz.ie
The statistics are based on properties advertised on Daft.ie for a given period. The regressions used are hedonic price regressions, accounting for all available and
measurable attributes of properties, with a Cooks Distance filter for outliers. Indices are based on standard methods, holding the mix of characteristics constant,
with the annual average of 2012 used as the base. Average sample sizes are 89,000 (sales listings) and 5,800 (sales transactions) and 10,000 (rental listings). For more
on the methodology, please see www.daft.ie/research. Contact: [email protected]
The data are based on actual asking prices of properties advertised on MyHome.ie with comparisons by quarter over the last eight years. Our main indices have been
constructed with a widely-used regression technique which adjusts for change in the mixture of properties for sale in each quarter. Our method is designed to reflect
price change independent of this variation in mix. Contact: [email protected]
The prime residential market is defined as the top 5% of the residential market by market value. The index is constructed by a repeat valuation process which is undertaken on a quarterly basis from a basket currently containing thirty properties. Office take-up is defined as when contracts have been signed. The city centre encompasses all of Dublin 1 and Dublin 2, from Barrow Street in the east of Dublin 4 to Ballsbridge to the south and west along to Grand Parade in Dublin 6 and south
to include Cuff Street in Dublin 8.Prime office rents are theoretical headline rent for prime office space let long-term to a grade A tenant and based on comparable letting evidence for that quarter allowing for normal incentives. The prime office investment yield is a theoretical value for which a prime office building let long-term to a
Grade A tenant would sell for based on comparable investment activity for that quarter.
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Property Industry Ireland (PII)
84/86 Lower Baggot Street, Dublin 2, Ireland.
Tel: +353 (0)1 605 1500
Email: [email protected]
AIB Group Headquarters
Bankcentre, Ballsbridge, Dublin 4, Ireland.
Tel: +353 (0)1 660 0311
DKM Economic Consultants
Office 6 Grand Canal Wharf, South Dock Road,
Ringsend, Dublin 4, Ireland.
Tel. +353 (0)1 667 0372
DKM have compiled the data presented on the residential
and commercial property market from a range of sources,
including the Department of the Environment, Heritage
and Local Government (DEHLG), the Central Statistics
Office (CSO), the Banking and Payments Federation of
Ireland (BPFI), Daft, MyHome, the Private Residential
Tenancies Board (PRTB), and the property agents listed
on the previous page. DKM would like to acknowledge
the cooperation of the agents in producing
this publication. Contact: [email protected]