Cb richard ellis gunne

C B R I C H A R D E L L I S
BI-MONTHLY RESEARCH REPORT NOVEMBER 2006
The Office Market
Activity in the Dublin office market continued at pace in the last two month period. Prime Office Rents
Indeed, take-up of over 60,000m2 in Q3 2006 alone is evidence of an exceptional level of activity in the Dublin market since the Summer period and suggests that over 185,000 m2 of office accommodation will be let in the capital this year – the highest level of letting activity since 1998. The majority of this activity is focused on the city centre market, where the vacancy rate has now declined to 8.0%. Prime rents in the core city centre market have risen over the course of 2006 reaching a new record level of €645 per m2 in recent weeks. Recent lettings include a letting to Dolmen Securities of approximately 1,500m2 at 75 St Stephen’s Green. McCann Fitzgerald’s move to their new 10,000m2 headquarters at Riverside 1 in September provided a further boost to the South Docks area while in recent weeks Anglo Irish Bank announced a decision to occupy approximately 22,000 m2 of new office accommodation being developed on the Brooks Thomas site on North Wall Quay. This will see the bank trading from a new corporate headquarter facility in Dublin Docklands by 2009. Activity in the suburbs remains steady with particularly strong demand from owner-occupiers for own-door office units ranging between 150 and 500 m2. While activity in the south suburbs continues to dominate, one of the most significant office lettings in the suburbs in recent weeks was the pre-letting of 2,600 m2 in the north suburbs to JP Morgan Tranaut in the Northern Cross scheme on the Malahide Road. Now that the route of Metro North has been announced, we expect to see increased demand for sites and office accommodation along the proposed route. For further information contact James Mulhall in our Offices Department at
The Retail Market
The Irish retail market has been very active in recent weeks. In the month that Prime Retail Zone A Rents
Blanchardstown Town Centre celebrated its tenth anniversary, American (Based on Transactional Evidence)
Grafton Street
bookstore Borders opened their first Irish facility at Westend Retail Park at the centre. Meanwhile, The Gap opened a new concession store at Arnotts on Henry Street, which itself lodged planning permission for an ambitious development which will be known as Northern Quarter. The Champion Sports chain was acquired by a new consortium who announced that they plan to open another 16 stores in Ireland over the coming year. Retailer ‘3G’ announced plans to open 28 Retail Warehousing Rents
Blanchardstown
new retail units in Ireland in 2007. Meanwhile, the UK retail chain Jessops, who have a facility on Grafton Street, recently acquired McKinnons of Belfast and Scotland which will inevitably facilitate further expansion in the South. The Pratt family opened a new 4,000m2 Avoca facility at Rathcoole (their eighth store) and are reportedly trading exceptionally well. Meanwhile, a new retail park development opened recently at Carrick-on-Suir. One of the more significant news stories in the Irish retail market in recent weeks was the granting of planning permission by Fingal County Council for a new IKEA store at Ballymun. Planning has also been granted in recent weeks for a 60,000m2 extension to The Square Shopping Centre in Tallaght. With demand continuing at pace, retailers in Ireland are now gearing up for what promises to be one of the best Christmas trading periods on record. For Further information contact Cormac Kennedy in our Retail Department at
The Industrial Market
The industrial sector continues to perform well, with strong activity levels prevailing. Demand continues to be dominated by owner-occupiers and it appears that recent interest rate hikes have had little effect on activity, with take-up figures up on the same period last year. Locations within close proximity to Dublin Airport or at major junctions close to the M50 continue to outperform. Prime capital values for starter units extending to less than 300 m2 have continued to increase, although values vary depending on what arterial route the property is located on. At the Stadium Centre in Northwest Dublin on the N3 corridor, capital values have now reached €2,045 per m2 while along the N7 corridor units at SIAC’s Baldonnell Business Park have achieved up to €2,236 per m2 with only 4 units remaining in the current phase. The highest capital values being achieved in the industrial sector currently are along the N1/M1 corridor, where values of up to €2,960 per m2 have been achieved at Airside Business Centre. Prime industrial land remains scarce with industrial land values currently trading for between €900,000 and €1 million per acre in Northwest Dublin and €1.6 million per acre along the N11 corridor in Southeast Dublin/North Wicklow. However, higher land prices have been recorded in and around Dublin Airport in recent weeks. A 7.5 acre site is currently being offered for sale by tender at Pinnock Hill in Swords. This site, which is guiding €13 million, will be an interesting barometer for prime industrial land in the capital. Prime rents remain unchanged at approximately €118 per m2 while rents for secondary accommodation are currently in the order of €86 per m2. For Further information contact Garrett McClean in our Industrial Department
The Irish Investment Market
The Irish investment market has seen a lot of activity in recent weeks with the sale and leaseback Prime Yields
campaigns of the country’s two main banks dominating the headlines. There has been much speculation as to the rationale behind these disposals. However, it makes considerable sense for financial institutions to free up capital when they can lend out multiples of the capital raised to borrowers. In addition, these sales have released much needed investment product to the market at a time when demand continues to outstrip supply. In fact, these sale and leaseback transactions have between them totalled in excess of €1 billion, which is in excess of the total size of the Irish investment market only three years ago. In the recent sales, AIB sold 12 branches to a single purchaser for in excess of €100 million, which will provide a return of 3.0% after costs. Meanwhile, Bank of Ireland released a portfolio of 36 branches, which were sold for in excess of the guide price of €237.5 million. The Bank of Ireland sale was to a combination of individual and portfolio bids from private investors, an institution and a private syndicator. While the overall yield was 3.25%, yields on individual properties ranged between 2.6% and 3.7%. AIB have now brought a further 25 bank branches to the market and expect to generate over €100 million from this sale. A number of further investments have been brought to the market in recent weeks including the proposed sale and leaseback of the new Eircom headquarter building on a forward-funding basis; the Comfort Inn Hotel and Kingswood Bar on the Naas Road; the ICON headquarter building and proposed extensions in South County Business Park, three industrial units at Fonthill Business Park and the Millennium Park offices at Osberstown in Naas. 2006 looks like being another record year in investment terms, with total investment spend in Ireland now looking likely to exceed €3 billion for the first time and total un-geared returns in excess of 25% expected to be generated. For further information contact Colm Luddy in our Investment Department at
The UK Investment Market
At last! Yield contraction has finally started to level off in the UK, with little downward pressure Prime Yields
to report across most sectors in the last two months. With landlords trying to take advantage of a very strong sellers market, a lot of poorer quality opportunities are now coming to the market and sourcing good quality stock is now more challenging. Returns from commercial property in the UK in 2006 are anticipated to be in the order of 18.0%, driven by a combination of yield contraction and rental growth, particularly within the Central London market. Most prime yields are now trending stable. Overall, we are happy to see that rental growth is becoming the dominant factor in overall returns as this is a more sustainable return in the medium term, particularly considering where interest rates are at present and the fact that they are expected to increase again in 2007. The UK base rate remains unchanged at 4.75% while the 5 year swap rate is currently 5.25%. This is not helping debt-buyers who although they are not yet priced out of the market, are finding it very difficult to compete against the UK-based institutions who do not require gearing and are less sensitive to low initial yields. We understand that UK institutional buyers are now happy to live with a cash return of 6.0% to 7.0% for absolute prime investments. Interesting deals which took place in the past two months include the sale of the IBM building in London’s South Bank, on behalf of private Irish investors to Sir Alan Sugar’s investment company Amsprop for £115 million, reflecting a net yield of 4.25% and the acquisition of St Andrew’s House in London EC4 for £35.73 million, reflecting an initial net yield of 5.0%. For further information please contact Andrew Gunne in our International Investment Department at
The Development Land Market
The Autumn selling season has kicked off with a large volume and variety of properties coming to the market. Competition is stronger than ever although strong prices are still being achieved for prime product. There have been some particularly notable transactions concluded in South Dublin in recent weeks including the sale of the 6.35 acre Shanganagh Prison site in Shankill for in excess of €20 million; the sale of the 2 acre Heather Road site in Sandyford for €25 million and the sale of the 3.8 acre Broadlands site in Killiney for €20 million. The top end of the market is continuing to impress with some high value transactions taking place, most notably the private sale of Dalymount Park. The 5.1 acre site, which is currently zoned amenity, was reportedly sold for €45 million. In recent weeks, a 12.36 acre residential site along the Royal Canal at Ashtown in Dublin 15 sold for over €70 million. The most high profile property to come to the market this season is South Wharf, the 25 acre former Irish Glass Bottle Company site in Ringsend, which has reportedly changed hands for a price in excess of €400 million. Hume Street Hospital in the city centre is another eagerly awaited sale. The property has a guide price of €25 million. Outside of Dublin, there has been a renewed interest in commuter towns, with land values increasing to over €1 million an acre for land with no planning in Kilbeggan and Naas and over €4 million an acre for land in Kilcock. The most significant announcement for this sector in recent weeks was the Government’s decision on the route of Metro North. We are without doubt likely to see an increase in land sales and values in all areas along this route over the coming months and years. For further information contact Wesley Rothwell in our Development Department at
The Dublin Pub Market
The trend of pubs with development potential being offered for sale has continued in the traditionally busy Autumn selling season in the Dublin licensed premises market. Properties with development potential currently on the market include The Eagle House, Dundrum; The Addison Lodge in Glasnevin and The Faussagh House in Cabra. Recent sales of pubs with development potential include Parnell Park House in Artane for c. €2.4 million and The Royal Oak in Finglas, which is believed to have sold for a price in the region of €7 million. The Swallows pub in Clondalkin, part of the Fitzgerald Group, changed hands in a quiet deal for c. €5.5 million while the Westmoreland Bar on Westmoreland Street sold for c. €4.5 million. The present level of sales activity is quieter than in previous years, reflecting current trading conditions and in particular the impact of random breath testing. As a result a “wait and see” attitude has returned to the licensed market place. The only exception to this trend is in the centre of the city where demand for licensed premises remains strong. As a result, close attention will be paid to the sale of The Pembroke Lounge on Pembroke Street which is being offered for sale by tender in early November, and which is expected to generate strong interest. For further information contact John Ryan in our Licensed Department at

Source: http://www.cbre.eu/ie_en/research/research_content/research_right_col/PropertyCommentaryNovember20061.pdf