The SCSI’s Annual Commercial Property Report – Review & Outlook 2019 shows mixed activity levels for 2018 across office, retail and industrial property. While the mood of commercial estate agents and their clients across the country is generally optimistic, there are clear challenges and concerns facing prospects for 2019 and beyond.
The Report, which is based on responses to a survey of SCSI members across Ireland, looks at each sector of the commercial market, including office, retail, industrial, development land, and residential investment.
In the office sector, the Report says that average rents are expected to continue to grow in 2019, with the rate of growth in Dublin versus outside Dublin varying depending on the type of property. Shortages of suitably sized, suitably located and modern offices were the dominant factors impacting on the market in 2018, each ranked in the top three factors by between 50% and 60% of respondents. Over half of respondents expect supply to increase in 2019, and at the same time over 40% expect vacancy rates to fall, suggesting a buoyant market.
In the retail sector, online retail and low tenant demand were the dominant issues highlighted by agents for 2018. Just under half of respondents expect the fashion sector to be most affected by the growth of online sales, with one-third expecting the household goods sector to be most affected. The dominant view for 2019 is that in most market segments, supply and demand will be equal. In secondary city centre streets, supply is expected to exceed demand.
In the industrial sector, the dominant issue highlighted by respondents for 2018 was the shortage of modern stock (ranked in the top three factors by 95% of respondents) followed by unsuitably sized stock and unsuitably located stock. The expected change in industrial rents for all types of units in 2019 was higher outside Dublin than in the capital, with an increase of 6.8% expected in prime rents compared to a little over 6% in Dublin. Supply is expected to fall short of demand for logistics units and for prime units. For secondary units, the dominant view is that supply and demand will be equal.
The majority of respondents reported that the supply of development land had increased in 2018, ranging from 50% in Connaught-Ulster to 58% in Dublin and the rest of Leinster. In the rest of Leinster (excluding Dublin), increases in development land values outpaced other regions in both the residential (16%) and retail (6%) sectors. Almost 60% of Dublin respondents expect supply to be less than demand, rising to 70% in Connaught-Ulster. In Munster, 40% of respondents expect supply to exceed demand. Development land values are expected to increase nationally for all types during 2019, the highest being residential land at 8%.
In all sectors, a soft Brexit was seen as a key factor that would assist business in 2019, largely due to the uncertainty that it has created.