2014 Commercial Property Review Highlights Tightening Office Markets and Growing Investment

Annual
Commercial
Property Review
& Outlook
2014

iv • SCSI Annual Commercial Property Review & Outlook 2014

SCSI Annual Commercial Property Review & Outlook 2014 • 1
Contents
1. Introduction 2
2. Key Results Summary 4
3. Economic Context & Market Overview 8
4. Office 10
5. Retail 16
6. Industrial 20
7. Investment 22
8. Pubs & Hotels 28
9. Development Land 30
10. Interviews with SCSI Chairs 32

2 • SCSI Annual Commercial Property Review & Outlook 2014
1: Introduction
The Commercial Property Review & Outlook 2014 published
by the Society of Chartered Surveyors Ireland (SCSI), provides
encouraging feedback from our members experiencing
increased levels of activity in certain sectors of the commercial
property market. However, the dwindling supply of modern
office accommodation in our cities, including Dublin, Cork and
Galway in particular, remains a challenge for attracting FDI
and retaining competitiveness.
2013 saw a turnaround in the Irish economy on a number
of fronts including the exiting of the IMF/EU bailout in
December, a decline in unemployment levels, increased
levels of consumer confidence and improved investor
sentiment towards Ireland – all of which had a positive
impact on the commercial property market.
The SCSI Commercial Property Review & Outlook 2014,
published in conjunction with Amárach Research,
confirms that prime office rents in Dublin are between
€350 per square metre and €377 per square metre in
Quarter 1 2014 based on improved activity levels at
the end of 2013 and start of 2014. There was a 23%
increase in office take up in 2013. The IDA won 164 new
Foreign Direct Investment (FDI) projects in 2013 which
contributed significantly to the demand for commercial
space, largely driven by multi-national organisations
engaged in the Telecoms, Media and Technology (TMT)
and Financial Services sectors.
The vacancy rate for prime office space has fallen close
to 9%, and two thirds of Chartered Surveyors expect
the supply of prime office space in Dublin to decrease
significantly over the coming 12 months. Almost 75%
of respondents expect rents for prime office space to
increase during 2014.
There are concerns about the lack of supply of new
commercial space being released to the market which
may impact our competitiveness in attracting FDI,
in particular there are supply issues for large office
floorplates in the major urban areas. Given that new
build construction projects virtually ceased in 2011 and
the likelihood that a correction in supply will not be
noticeable until 2015-17, respondents to our survey raised
concerns that multinational companies will potentially
look unfavourably on Ireland.
Measures to improve the supply of office space including
reducing the length of time for the planning process,
speeding up the Docklands SDZ and ensuring the
availability of development finance for speculative
development, were all highlighted as important
considerations by respondents.
The latest KBC Ireland/ESRI Consumer Sentiment Index
increased to 84.6 in January 2014, the highest levels
in recent years and this is beginning to have a positive
impact on the retail market. However, improvements in
the retail property sector are largely confined to prime
retail space where rents are expected to increase in 2014,
with secondary areas remaining more challenged.
Eamonn Maguire
SCSI Commercial Agency
Professional Group Chairman

Take-up in the industrial sector increased by 18% in 2013
and rents remained steady in 2013. Although there is
an oversupply in certain locations, there is increased
demand for prime industrial space, in particular by online
companies with a greater need for modern logistics and
distribution centres.
Around €1.9bn was invested in the Irish Property market
in 2013, a threefold increase on 2012. According to the
SCSI / IPD Index Quarter 4 results, property values rose
by 3.2% for the year – the first annual capital growth since
2007; while income returns averaged 9.2%.
While the turnaround was mainly driven by Dublin’s office
market, improvements in the Irish economy in the second
half of 2013 led to growth in both the retail and industrial
sectors by the end of Quarter 4 - the first positive results
in both these sectors since the onset of the property
market downturn.
Other positive developments in 2013 which are likely to
support growth in the Irish property market in the year
ahead include the launch of both the Green and Hibernia
REITs, a positive step towards market liquidity, the
retention for a further 12 months of a significant incentive
to property investors with the extension of Capital Gains
Tax Relief and finally the publication by the PSRA of the
Commercial Lease Database – a move towards greater
market transparency and improved decision making.

Key Results
investment
OFFICE
Office Supply in Cork and Galway is tightening
due to increased interest
23% increase in Take-Up in 2013
PUBS & RETAIL
HOTELS
Capital values for
Hotels in Dublin
increased by
5.5% in 2013
INDUSTRIAL LAND
Prime Industrial rents in Dublin
remain steady at €61 per M2
per annum
Dublin
is the Top
Spot for new
investment in 2014
Chartered Surveyors
say there is an increase
in the supply of
housing and office
development sites
in Dublin
Dublin Prime rents are
between €350 per M2
& €377 per M2 in Quarter 1 2014
75% of Chartered Surveyors
expect Prime Retail rents in Dublin
to increase in 2014

2: Key Results Summary
The outlook for the commercial property sector in 2014
is optimistic based on improving consumer confidence,
which is at its highest level in five years and improvements
in other economic indicators such as GDP which is
predicted to grow by 2.7% in 2014. There is also growing
international investor confidence helped by declining Irish
bond yields and the upgrading of Ireland’s debt status to
investment grade. This recovery and progress is reflected
across all commercial property sectors, particularly the
office market in Dublin.
Office
» The office sector in Dublin is leading the way in the Irish
Commercial Property Market. In 2013 there was a strong
increase in demand and a contraction in supply.
» In Dublin, prime office rents are between €350 per square
metre and €377 per square metre in Quarter 1 2014 based
on large transactions and a tightening of supply. This
represents an increase in prime office rents of up to 10%
over the period from Quarter 4 2013 to Quarter 1 2014.
» There was a 23% increase in take-up in the office
market in 2013.
» In Dublin, prime office rents increased by 10% between 2012
and 2013. Prime rents also increased in Leinster, Munster
and Connaught/Ulster. Rents for peripheral third generation
offices, older central offices and Georgian offices increased
both in Dublin and outside Dublin.
» There were 164 new FDI projects, and a net 7,000 new jobs
created through IDA backed companies, the highest for
a decade. IDA Ireland predicts further growth in the FDI
sector in 2014 and the international pipeline is said to be
good. One industry expert saw huge growth in FDI demand
for large floorplate office space in the last quarter of 2013.
» Demand for office space is largely driven by multi-national
organisations in the Telecoms, Media and Technology (TMT)
sectors as well as the Financial Services sector. Growth in
demand for office space is also expected to come from
indigenous professional firms based in Dublin.
» However, the vacancy rate for prime office space in Dublin
City Centre has fallen to 9%, close to shortage levels, and
two thirds of Chartered Surveyors expect the supply of
prime office space in Dublin to decrease even further over
the next 12 months.
» There are also concerns emerging about a shortage of large
office space in Cork City and Galway City as supply tightens
due to increased interest.
» There is a concern about the length of time to complete
new office developments. Experts believe that it can take
up to 3 years before office space is developed and ready for
occupation. This length of time is needed for site assembly,
the planning process, construction and fit-out. There is a
risk much needed FDI projects may go elsewhere if the
stock is not available.
» The adoption of the Docklands SDZ is eagerly awaited as the
planning process is expected to speed-up. The Docklands
SDZ is due to be adopted in July 2015, but there are already
concerns that this may be delayed further.
In the meantime planning applications cannot be submitted
in this area until the SDZ is formally adopted.
» Rents for prime office space in Dublin City Centre are felt to
be high enough to justify speculative development of new
office properties. However, a bank source has indicated that
banks are not lending for speculative development. There
is a call for development finance to be made available from
alternative sources such as NAMA or REITs funds.
» This shortage of large floorplate office space in Dublin
is leading to concerns about increasing rents and the
possibility of FDI demand moving elsewhere. The IDA
is widely reported as saying that technology demand in
particular cannot afford to wait 24 months to get off
the ground.
» There are also concerns that public services such
as drainage and roads will not be in place for new
developments and there is a call for the government and
the local authorities to make quicker decisions on policies
for these services.
“As rents are now in the region of €350 psm/€32.50
psf to €375 psm/€35 psf – the minimum level
considered necessary to fund construction - it is likely
that we will see new commercial construction this
year and more refurbishment and upgrading of the
existing stock” Pauline Daly, Jones Lang LaSalle
Retail
» Rents for prime retail in Dublin continued to fall in 2013
and are now just above the €4,000 per square metre
per annum mark. Rents for major town centre style malls
showed a marginal decrease, indicating that rents in this
sector have stabilised.
» Rents for prime retail increased in Leinster and are now
at €325 per square metre, an increase of 7.3%. Rents for
prime retail continued to fall in Munster in 2013 reflecting
tough trading conditions in Cork City, Limerick City and
Waterford City. On the other hand, rents increased across
most retail categories in Connaught/Ulster in 2013, possibly
reflecting more buoyant conditions in Galway City.
» There is an increase in the volume and quality of enquiries
coming from both local and international retailers,
indicating possible greater activity in the retail market
in 2014.
» Around three quarters of Chartered Surveyors do not
expect an increase in the supply of prime retail in Dublin
e.g. Grafton Street and Henry Street, in 2014. According to
one industry expert, vacancy is down to one or two outlets
on Grafton Street.
» However, the outlook on urban centres in Munster remains
more subdued.
» Improvements in the economy and rising consumer
confidence are expected to translate into increased
consumer spend.

“In 2014, continued economic stability will foster
consumer confidence, leading to increased consumer
spending. The Troika’s departure sent a signal that we
were back in charge of our own destiny. Along with
an improved macro environment, this leads me to
believe that the year ahead will be one of improved
stability; greater transactional activity and increasing
prime retail rents and values” Hugh Markey,
Director, Lisney
Industrial
» Industrial prime rents have remained steady in Dublin at
€61 per sq.m. per annum. Industrial rents increased in all
categories in Leinster.
» Demand is increasing for prime industrial space close to
the M50 and other main roadways out of Dublin. Demand
is being driven by online distribution centres, data centres
and the food sector (processing, distribution and storage).
» However, a lack of construction of these properties in recent
years is leading to concerns about a shortage of supply.
Additionally, current rents are not viewed as high enough to
justify speculative development in 2014.
Investment
» Investment in commercial property accelerated to almost
€1.9bn in 2013. The main demand was for large office
properties and growth was also recorded for industrial
and retail properties. This was three times higher than
investment levels in 2012.
» Over half of investment spend in 2013 came from
international investors with strong demand from the US,
Europe and Asia. This is set to continue as an international
report ranked Dublin as the number one location in Europe
for new investment in 2014. This predicted growth is based
on Ireland’s economic recovery.
» This improvement in investor sentiment is reflected in the
SCSI/IPD Ireland Quarterly Property Index at the end of
December 2013. This index measures ungeared total returns
to directly held standing property investments from one
open market valuation to the next. The index returned 5.7%
for Q4 2013. The index shows increases across all sectors;
Retail, Office and Industrial.
» The expected expiration of the Capital Gains Tax Break
at the end of 2013 fuelled local investment from private
individuals and pension funds. The extension of the tax
break for another year is a spur for further investment in
the commercial property market.
» Following the successful launch of two REITs in 2013, other
REIT funds are expected to be launched in 2014. This is
expected to raise further confidence and liquidity in the
investment market.
“The overall picture is a gradual recovery with
increasing employment and decreasing interest
rates. Retail and office space will gradually improve
and new development will start to happen as people
are actively working on getting planning permission
for development in late 2014/ early 2015. There will
be continued demand for good value investment
property” Ray Hanley, SCSI Valuations Professional
Group Chair
Hotels & Pubs
» In Dublin, hotels (+5.5%) and restaurants (+1.4%) registered
increases in capital values in 2013. This reflected a busy
year for the hotel property market with a higher number of
property transactions than had been anticipated.
» Declining capital values are still evident in pubs, hotels
and restaurants outside Dublin, though improvements are
apparent, particularly in Connaught/Ulster.
» The tourism sector had its best year since the start of the
global economic crisis and this had a positive impact on
hotels and restaurants with capital values recording positive
growth. Overseas visitor numbers are expected to continue
to grow in 2014 with new air and sea routes into Ireland
and the opening of the Atlantic Way. This augurs well for
further improvements across the pub and hotel sector.
Development Land
» Non-agricultural land sales were up four fold between
2012 and 2014. This activity in Dublin is being driven by
the improving office market and the increasing demand
for family homes in the residential market. Three quarters
of Chartered Surveyors said that the supply of housing
development sites had increased in Dublin and over half
said that the supply of office development sites in Dublin
had increased in 2013.
» However, the greater majority of Chartered Surveyors said
that the supply of development land for retail sites and
industrial sites in Dublin did not increase in 2013.
» The majority of Chartered Surveyors said that development
land had decreased or remained the same in 2013 in
Leinster, Munster and Connaught/Ulster.
“Activity will continue to grow based on the demands
of FDI and the exporting sectors. Rental levels in
some sectors are either stabilising or have returned
to growth with the prospect of yield compression.
Difficulties and uncertainty within the Euro zone
banking system together with tight credit conditions
experienced by SMEs remain areas of particular
concern” Eamonn Maguire, SCSI Commercial Agency

OPPORTUNITIES
TO MEET DEMAND
Reduce Length of Time for
Planning Process
Speed up Docklands SDZ
Ensure Public Services are Ready for
New Developments
Availability of Finance for Speculative
Development
Alternative Sources of
Development Finance
ECONOMIC
CONTEXT
Economic Growth
Consumer Confidence
Increasing Employment
International Confidence
Investment Growth
DEMAND
VERSUS SUPPLY
Foreign Direct Investment (FDI)
Oce Vacancy Rate is
Falling in Dublin
Rising values in Dublin
Improvements in Retail in Dublin
Turnaround in Industrial
Key Challenges
Opportunities in the
Commercial Market

8 • SCSI Annual Commercial Property Review Outlook 2014
3: Economic Context Market Overview
Ireland has entered 2014 with optimism having
achieved some tangible economic goals in 2013.
Among these were:
» Unemployment is falling and there is a sustained
growth in the numbers working in the economy. The
unemployment rate fell from 14% in December 2012
to 11.9% in February 2014, according to the CSO.
The economy created c.58,000 new jobs in the
year to Q3 2013.
» Exiting the bailout on December 15th 2013 was a
crucial step for business and consumer confidence in
Ireland and overseas. The fact that Ireland was the first
country to exit such a programme in itself contributed
to the boost in consumer confidence.
» A continued strong performance by Ireland in the
market for Foreign Direct Investment. There were 164
new FDI projects,1 and a net 7,000 new jobs created
through IDA backed companies, the highest for a
decade.
» The decline in Irish bond yields reflected international
confidence in Ireland and the Irish recovery.
» The upgrading of Ireland’s debt status to investment
grade by Moody’s has further improved confidence
levels among international investors and multinational
organisations.
Amárach Research has been tracking consumer
confidence on a monthly basis for the past five years.
From the lows of November 2010 when Ireland accepted
bailout lending from the EU/IMF, Quarter 4 2013 was
marked month on month by the highest scores recorded,
with each month higher than the previous month.
January 2014’s ERI of 33.3 was a record since the Index
started five years ago.
Consumers certainly do not feel that the recession is
over, but Amárach’s Recovery Index and other anecdotal
evidence from qualitative research leads to the view that
while consumers may not yet feel the recovery in their
own pockets, they are certainly seeing and believing in
the green shoots around them. For the first time since
May 2011, a majority of consumers felt confident about
the future.
This momentum is reflected in the ESRI’s Winter 2013
quarterly economic commentary2 which states that
the Irish economy appears to have turned a corner as
domestic demand has increased by 0.9% in 2013, the
first increase since the crisis began. The ESRI says that
Ireland’s economy will experience relatively balanced
growth in 2014, with consumer spending, trade and
investment driving growth in the year ahead. This is
supported in the Central Bank’s3 latest quarterly report
which predicts that consumer spending is expected to
increase in both volume and value terms – for the first
time in almost seven years.
» Using the answers to the question on ‘stages of recovery’ we have created the Economic
Recovery Index, which ranges from 0 to 100 (0 = deep recession; 100 = back to peak).
» Our Index continues to improve: reaching 33.3 in January 2014,
the fourth record breaking performance in row:
35 Source: Amárach Research, January 2014
2009
April
2010
January
2012
January
2013
January
2014
January
» The Economic Recovery Index
30
25
20
15
10
5
0
2011
January

SCSI Annual Commercial Property Review Outlook 2014 • 9
» ESRI December 2013
Output (Real Annual Growth %) 2010 2011 2012 2013 2014
Private Consumer Expenditure 0.9 -1.6 -0.3 -0.3 1.5
Public Net Expenditure -6.9 -2.8 -3.7 0.3 -1.3
Investment -22.6 -9.5 -1.0 2.1 4.5
Exports 6.4 5.4 1.6 0.3 4.6
Imports 3.6 -0.4 0.0 0.9 3.9
Gross Domestic Product (GDP) -1.1 2.2 0.2 0.3 2.7
Gross National Product (GNP) 0.5 -1.6 1.8 2.0 2.7
This upturn in economic activity bodes well for the
commercial property sector. The SCSI survey of members
also reflects this optimism as Chartered Surveyors feel
that an improvement in sentiment is leading to increased
activity and investment in the market.
“The general outlook is reasonably positive. The
economy and key indicators are improving and
interest rates are low. Unemployment is decreasing”
Ray Hanley, SCSI Valuations Professional
Group Chair
This is also having an impact across sectors in the
commercial market, in this instance the industrial sector.
“Generally there is more activity, greater confidence
and more positive press and this has led to an
acceleration in the take-up of industrial space.
Businesses are starting to do better and this is
having an overall impact”
Chartered Surveyor, Dublin
Source: ESRI Quarterly
Economic Commentary
Winter 2013
The improvement in sentiment is reflected in the SCSI/
RICS Irish Commercial Property Monitor Occupier
Sentiment Index (OSI).
The Irish Occupier Sentiment Index fell only slightly in
Q4 to 25 from Q3’s value of 28. The SCSI/RICS Property
Monitor states that the office sector is leading the
recovery in Irish Occupier Sentiment. It adds that the
office sector is the most active market with a further
strong increase in demand and contraction in leasable
space keeping Q4 rent expectations near Q3’s series high.
It also states that other sectors are beginning to pick up
with rent expectations in both the retail and industrial
sectors positive for a second consecutive quarter.
While growth in the Irish economy is important, the
US economy is also an important bellwether, and is
considered key to growth of FDI demand for office space
in Ireland.
“The office market is very heavily influenced by the
US economy due to FDI demand from US companies
such as Google, Facebook and Dropbox” Roland
O’Connell, Director – Offices, Savills
» Occupier Sentiment Index
40%
20%
0%
-20%
-40%
-60%
-80%
-100%
Net Balance %
2008 2009 2010 2011 2012 2013
Source: SCSI / RICS Irish Commercial Property Monitor − Q4 2013
1 IDA Ireland, 3rd January 2014.
2 ESRI Quarterly Economic Commentary, Winter 2013.
3 Central Bank of Ireland Quarterly Report, Q1 2014.

4:
Oce
According to the SCSI/RICS Irish Commercial
Property Monitor in Quarter 4 2013,
improvements in the Irish economy have
resulted in increased demand for commercial
lettings, particularly office lettings and this
has continued into the first quarter of 2014.
However the stock of leasable property has
begun to decline, indicating that shortages are
emerging for offices in prime locations.
The SCSI survey of members as well as interviews with
SCSI Chairs and leading industry experts confirms that
much of the activity in the commercial property market
in 2013 focused on the Dublin office market.
Take-Up Rates
There was a 23% increase in take-up in the office market
in 2013 (1.92 million .sq.ft.) compared to 2012.4 The
continued success of the IDA in attracting top-level
foreign direct investment (FDI) has accounted for much
of this market activity in Dublin.
5:
Retail
90%
40%
-10%
6:
Industrial
There were 164 new FDI projects,5 and a net 7,000 new
jobs created through IDA backed companies, the highest
for a decade.
Vacancy Rates
This growth in demand for office space in Dublin is having
an impact on vacancy rates, with vacancy rates falling,
particularly in Dublin City Centre.
“Two years ago the vacancy rate was over 24% in
Dublin, but it is down to 15.3% now. This fall is now
accelerating. It is currently 9% vacancy in the City
Centre. 7% to 8% vacancy is considered a shortage”
Roland O’Connell, Director – Offices, Savills
The vacancy rate for prime offices in Dublin 2/4 has fallen
as low as 4% and is expected to lead to rental growth
in 2014.
“The position for prime Grade A buildings in Dublin
2/4 is a vacancy rate below 4% which is likely to
result in rental growth in this sector during 2014”
Ray Hanley, SCSI Valuations Professional Group Chair
» Occupier Demand and Available Space
-50%
-110%
2008 2009 2010 2011 2012 2013
Net Balance %
Occupier Demand Available Space

While the fall in the vacancy rate is most pronounced in
Dublin City Centre, there is evidence that this is starting
to fall in other parts of Dublin and in other cities such as
Cork and Galway.
“There was oversupply across the entire Dublin
market for a number of years and oversupply is
currently higher in some parts of Dublin than others.
The vacancy rate is higher in suburban Dublin than
City Centre Dublin e.g. the vacancy rate in Tallaght
is 30%, but this is falling and will continue to fall.
Choice is falling fast, even in Cork and Galway there is
a shortage of good quality large new office buildings”
This falling vacancy rate is evident in Cork City where
there is growing demand for large office space and
concerns about a shortage of supply.
“The office market is showing signs of improvement
and there is a shortage of third generation Grade
A offices in Cork City. To an extent there is a two
speed office market in Cork City. There is activity
and some level of demand for large floorplate
office space amongst international occupiers”
Trevor McCarthy, SCSI Rural Profession Group Chair,
Southern Region
Rents Yields
In Dublin, prime office rents are between €350 per square
metre and €377 per square metre in Quarter 1 2014 based
on large transactions and a tightening of supply.
In the SCSI survey of members, Chartered Surveyors were
asked to provide average rents and yields for the office
sector. The survey results indicate a significant increase
in office rents across all regions between 2012 and 2013,
albeit this is mainly confined to prime areas. In particular,
rent for prime 3rd generation offices rose significantly
across all regions in 2013.
In Dublin, prime 3rd generation rents averaged €342 per
sq.m. in 2013, representing a 10% increase year on year.
A shortage in prime office property in Dublin City Centre
has led to a resumption of rental growth in this sector.
“In the second half of 2013, rents started to grow,
and we will see further growth” Roland O’Connell,
Director – Offices, Savills
Not surprisingly, given the rent increases witnessed in
2013, further significant increases are expected for office
rents in Dublin in 2014. Almost all Chartered Surveyors
predict an increase in Dublin office rents for prime
offices (70,000-120,000 sq. ft.) and prime 3rd generation
offices over the next 12 months, largely due to a lack of
supply of these type of properties. On the other hand,
less than half of Chartered Surveyors expect rents to
increase for older general offices and Georgian offices.
» Office Rents per square metre per annum at Year End
Dublin Rest of Leinster Munster Connaught / Ulster
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
Prime 3rd Generation €342 €310 €320 €355 €136 €89 €89 €95 €144 €120 €137 €155 €99 €80 €70 €75
Peripheral 3rd Generation €150 €132 €135 €160 €107 €76 €74 €80 €113 €100 €113 €125 €69 €58 €51 €60
Older Central Offices €171 €149 €172 €200 €83 €59 €52 €70 €79 €75 €92 €105 €56 €51 €46 €55
Georgian Offices €163 €150 €165 €187 n/a n/a n/a n/a €76 €71 €90 €105 n/a n/a n/a n/a
Source: SCSI Survey of Members, Dec 2013.
» Expectations — Dublin Office Property Rents
56% 46%
96% 95% 41%
Increase Remain same Decrease
51%
47%
40%
4% 5% 3% 8% 7%
Prime offices
70,000 -
120,000 sq.ft.
Prime
3rd
Generation
Peripheral
3rd
Generation
Older
General
Offices
Georgian
Offices
4 Pauline Daly, Jones Lang LaSalle at the SCSI/IPD Quarterly
Briefing – 28th January 2014.
5 IDA Ireland, 3rd January 2014.

A lack of office development over the last two to three
years has resulted in supply shortages of prime office
properties in Dublin City Centre. This has already fuelled
rental growth in 2013. New supply of prime office
properties is not predicted until 2015 at the earliest,
therefore rents are expected to increase even further.
There are even fears that this supply shortage could lead
to an acceleration in rents.
“We want steady, sensible, upward movement but
if it gets to a stage of shortage then competition
between tenants for higher quality offices could
happen and this could drive rents higher, e.g.
a rent spike” Roland O’Connell, Director – Offices,
Savills
“With falling vacancy rates in the capital, supply
and demand imbalances are exerting an upward
pressure on rents particularly for the large office lot
sizes” Eamonn Maguire, SCSI Commercial Agency
Rents started to increase in 2013 and they are predicted
to increase again in 2014.
“In the second half of 2013, rents started to grow
and we will see further growth”
Rents are even expected to increase four fold in 2014.
“Prime rents in the office sector are likely to reach
€430 per sq.m. during 2014” Ray Hanley, SCSI
Valuations Professional Group Chair
However, there are concerns that significantly higher rents
could lead to a weakness in FDI demand.
“If rents are too high then there is a danger that
FDI demand will go elsewhere” Roland O’Connell,
The survey of SCSI members reveals a slight decrease
or standstill in office net yields in 2013 in comparison
to 2012. Most significantly, yields for Georgian offices in
Munster rose from 10.5% in 2012 to 11.2% in 2013.
Opportunities and Challenges
As outlined earlier, the continued success of the IDA
in attracting top-level foreign direct investment (FDI)
has accounted for much of the demand for prime office
space in Dublin. This has driven demand specifically for
large office space i.e. 5,000 sq.m. plus, in certain parts
of Dublin City e.g. Dublin 2/Docklands and Dublin 4. This
demand for office space is also largely driven by the
Telecom, Media and Technology (TMT) sectors, as well as
the financial services sector.
“The main demand is from the Telecoms, Media and
Technology sectors, the likes of Google, Facebook,
Yahoo and Dropbox. The FDIs will be the main
driver now and in the future” Roland O’Connell,
There are signs that demand for large floorplate office
space is increasing with rising demand for this space in
the last quarter of 2013.
“Of over 700 lettings since the beginning of 2010
only 15 were for more than 5,000 sq.m. and of these
5 were in the last quarter”
John McCartney, Director of Research, Savills
» Office Net Yields
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
Prime 3rd Generation 6.7% 7.4% 7.5% 7.4% 8.6% 9.0% 9.4% 9.2% 9.4% 9.5% 8.7% 8.2% 9% 9.6% 7.8% 7.3%
Peripheral 3rd Generation 8.5% 8.9% 8.8% 8.7% 10% 10.3% 9.8% 9.4% 10.1% 10.1% 9.3% 8.6% 10.3% 10% 7.9% 7.5%
Older Central Offices 8.6% 9.1% 8.9% 8.5% 11% 11.1% 10.1% 9.8% 10.8% 10.8% 9.5% 9.0% 10.5% 10.5% 8.6% 8.1%
Georgian Offices 9.1% 9.5% 9.1% 8.5% n/a n/a n/a n/a 11.2% 10.5% 10% 9% n/a n/a n/a n/a

While FDI demand is expected to continue to grow,
a new source of demand is starting to emerge with
indigenous professional firms starting to expand on the
back of FDI growth and general economic growth.
“Due to improvements in the economy and demand
from FDI’s we are seeing a knock-on effect in
other sectors such as real estate, legal firms and
accountancy firms with all these staffing-up. It is
not a huge demand for office space from these local
professional firms now but it will filter through and
grow” Roland O’Connell, Director – Offices, Savills
Office Supply Challenges
In the SCSI survey of members, Chartered Surveyors
were asked for their predictions on the supply of office
properties in Dublin.
The key issue in the office property market in Dublin is a
lack of supply. Around two thirds of Chartered Surveyors
expect the supply of prime offices (70,000 – 120,000
sq.ft.) and prime 3rd generation offices to decrease over
the next 12 months. A further one fifth expect the supply
of prime offices and prime 3rd generation offices to
remain the same. Furthermore, the majority of Chartered
Surveyors do not expect to see an increase in the supply
of peripheral 3rd generation, older general offices and
Georgian offices in the next 12 months.
SCSI members and other industry experts were asked
about the main factors that are having an impact on the
supply of office properties.
As indicated earlier, there is an increasing demand for
large prime office space which is leading to concerns that
there will be a shortage of these types of properties in
2014 as it will take until at least 2015/2017 before a new
supply of these buildings can be completed.
“Dublin has picked up and mostly better/new
buildings are being leased. Now there is a shortage
of large office buildings in the City Centre and a
severe shortage in the large prime category. There
will be no real development completions until
2015/17. In 2014 we are facing into a shortage of
large prime office buildings in the City Centre. We
are also seeing a fall off in prime suburban offices
coming towards the end of this year, particularly in
South Dublin” Roland O’Connell, Director – Offices,
Savills
“The supply of Grade A office space in better
locations is tight. There is a need for new
office space to meet FDI demand and there are
opportunities for new developments and investors”
Ray Hanley, SCSI Valuations Professional
Group Chair
Additionally there is no speculative building on the
horizon, leading to further concerns about a shortage of
large office buildings.
“There is a fear that there will be a shortage of big
floorplate properties as most of these are taken
up and there is no new speculative building with
planning permission in the pipeline”
Trevor McCarthy, SCSI Rural Profession Group Chair,
Southern Region
» Expectations — Supply of Office Properties in
Dublin
13% 19%
21% 24%
18% 19%
15%
49% 53%
44%
38%
32%
28%
65% 63%
Prime offices
70,000 -
120,000 sq.ft.
Prime
3rd
Generation
Peripheral
3rd
Generation
Older
General
Offices
Georgian
Offices

This shortage is mainly attributed to a lack of
development of office space over the last two years
and it is predicted that there will be no completion of
developments in 2014. The few office developments that
have started will not be ready until at least 2015.
“In 2012 and 2013 there were no new office
buildings and in 2014 I can say there will be new
office buildings. There are one or two office
buildings been built at the moment. The most talked
about of these is Canada House on St. Stephen’s
Green, but this will not be ready until 2015”
Experts believe that it can take up to 3 years before office
space is developed and ready for occupation. This length
of time is needed for site assembly, the planning process,
construction and fit-out.
“One of the main issues with office property is the
length of time to develop. The planning process can
take 12 months and it can take another 18 months to
two years before construction takes place, so it can
take at least 3 years before the building is ready for
occupation” Roland O’Connell, Director – Offices,
Savills
“Our overall view is that there are positive signs of
growing interest among new investors in terms of
developing out projects in the commercial market,
and from this we will see a new pipeline of work
coming through. Unfortunately it could take
another 12 to 18 months for this new work to
commence on site”
Mark McCreevy, Commercial Director Ireland, SISK
“Given the lengthy timeline between entering
the planning phase and completion of buildings,
the question of supply of new buildings in prime
locations will not be solved in the short term” Ray
Hanley, SCSI Valuations Professional Group Chair
In the meantime, demand for office space is continuing to
grow so there are concerns about an ability to meet this
demand and that this demand might weaken.
“In the commercial market, there is an acute
shortage of large office space in Dublin City Centre
which is real problem for both FDI and domestic
demand, particularly in the IT and financial services
sectors” Eamonn Maguire, SCSI Commercial Agency
“If there is no availability of office supply or if rents
are too high then there is a danger that FDI demand
will go elsewhere” Roland O’Connell,
It is widely reported that the IDA is concerned about
the shortage of prime commercial property in Dublin
and that this may hamper its efforts in attracting large
multinational firms, particularly technology companies,
who need to get up and running straight away.
“We believe that large organisations such as Google
who have invested heavily in their operation in
Ireland wish to expand now and not 18 months down
the line” Industry Representative
Office Supply Solutions
SCSI members and other stakeholders were asked to
give their views on possible solutions to the supply
issue affecting the office market. The main solutions
suggested included:
» Changes to the planning cycle such as reducing
the time period from submission of the planning
application to the final decision
» Quicker adoption of the Docklands SDZ
» Ensuring Public Services are in place for any new
schemes
» Availability of development finance for speculative
development
» Alternative sources of funding for development finance
Each of these suggested solutions are discussed in
greater detail below.
One of the main issues is the speed of building new
office supply. The current turnaround time of up to three
years may be too lengthy for FDI demand from the likes
of Google and other technology sector demand. The
planning process can take a year and this is felt to be too
protracted. The introduction of a Strategic Development
Zone (SDZ) in the former Docklands is felt to be a step in
the right direction. However even the process of setting
up this SDZ is taking time and it is not expected to be in
place until July 2014 at the earliest.

“Once adopted (the SDZ) it should speed up the
planning process but the process of setting up the
SDZ is taking time. And it might be July or even later
before it’s set-up. So planning can’t be lodged at the
moment until the SDZ is adopted” Roland O’Connell,
Experts also mention planning and the availability of
suitable land. There is a view that greater flexibility and
innovation is needed at government and local authority
level to ensure that planning for, say, combined office/
residential developments can get through.
“We need to get planning for a combination of right
developments e.g. office and residential. We should
be catering for different types of development.
Policy at government and local authority level needs
to be more inventive and flexible” Roland O’Connell,
Experts also believe that local authority services for
drainage and roads etc. needs to be place in time for any
new schemes.
“Services such as drainage and roads are also big
issues and there is concern that even if planning
does go ahead, the local authorities need to get
their act together and ensure that services for new
schemes are dealt with quickly and without delay.
Applications need to be made in confidence. The
local authorities need to decide what their policies
are in relation to, say, drainage in the Docklands,
and they need to get the work done so this is in
place for the new scheme” Roland O’Connell,
The government should focus on improvements
to roads and services where funding permits. Ray
The availability of development finance is also a key
issue, particularly in relation to speculative development.
It is felt that some leeway is needed with small-scale
speculative development, to kick-start office
development.
“In a Dublin context, speculative development is
needed. I would like to see one or two experienced
office developers to get on site and start
developing. But a lack of development finance won’t
let that happen in sufficient time” Roland O’Connell,
Director – Offices Savills
Rents are perceived to be at the level required for
development in Dublin.
“Office sites are out there. Rents were not viable
before but they are now. But there is an issue with
the availability of development finance” Roland
However, according to a senior banker, banks are lending
for construction but only where the property is pre-let
to a multinational tenant. They are not interested in
speculative construction projects.
One solution might be to involve NAMA and/or REITs in
the provision of funding for development.
“There is an opportunity for the key stakeholders
such as NAMA and emerging sources such as REITs
to work closely with developers to either fund or
enter joint ventures to avail of the turnaround in this
sector” Eamonn Maguire, SCSI Commercial Agency
“There is a problem with the availability of
development finance from banks and other financial
institutions. The Government could help by
enabling NAMA to be active in financing commercial
development” Roland O’Connell, Director – Offices,
Savills

5:
Retail
The Irish economy turned a corner in 2013 with
achievements across a number of economic
indicators including increased employment,
GDP growth and an increase in consumer
demand. This has had a positive knock-on
effect on consumer confidence which is now
at its highest level since the economic crisis
began. The latest KBC Ireland/ESRI Consumer
Sentiment Index increased to 84.6 in January
2014, from 79.8 in December 2013 and 64.2
in January 2013. During the economic crisis,
the retail sector suffered more than any other
sector in the commercial property market.
There is now hope that improving consumer
confidence will start to have a positive impact
on the retail sector.
Vacancy Rates
According to an industry expert the current vacancy rate
is low for prime retail in Grafton Street and Henry Street,
as well as in Dublin suburban shopping centres such as
Dundrum, Blanchardstown, Liffey Valley and the Pavilions.
“There is room for optimism with improved
economic data and consumer confidence”
Hugh Markey, Director, Lisney
6:
Industrial
The number of vacancies in Grafton Street has fallen from
twelve in 2012, to one or two currently. However, high
vacancy rates are reported in other cities outside Dublin
such as Cork, Limerick and Waterford.
“There is a high vacancy rate at either end of Patrick
Street, Cork so it will take longer to improve there
and there is also a high vacancy rate in Limerick
and Waterford” Hugh Markey, Director, Lisney
Rents Yields
The SCSI survey of members reveals a steady drop in
rents for retail premises in Dublin in 2013. In 2013, prime
retail rents were just over €4,000 per sq.m. per annum,
representing a marginal decrease of 2.5%, indicating that
rents are starting to bottom out.
» Dublin Retail — Rents and Yields
7:
Investment
“Rent levels have stopped falling in the better
locations” Hugh Markey, Director, Lisney
Retail units in major town centre malls in Dublin
witnessed one of the lowest decreases in 2013, at -0.8%,
suggesting that rents have bottomed out in this sector.
There are also indications that the vacancy rate in the
major shopping centres in Dublin is starting to decrease.
Rents Yields
Rents per square metre per annum
at year end
2013
(end)
2012
(end)
2011
(end)
2010
(end)
2013 2012 2011 2010
Prime Retail €4,029 €4,135 €4,532 €5,355 6.4% 6.8% 6.8% 6.5%
Major Town Centre Style Malls €2,104 €2,122 €2,195 €2,530 7.9% 8.1% 8% 7.8%
City Centre Developments €1,704 €1,766 €1,865 €2,055 7.9% 8.3% 8% 7.7%
Other Centres €903 €977 €1,103 €1,330 9% 9.3% 8.9% 8.5%
Secondary City Centre Streets €760 €857 €1,109 €1,355 9.2% 9.4% 8.9% 8.4%
Neighbourhood Shopping Centres €304 €320 €375 €350 9.8% 9.9% 9.7% 8.9%
Retail Warehouses €206 €240 €380 €215 9.9% 10.2% 9.2% 8.8%

» Retail Rents Per Square Metre Per Annum at Year End
“There has been a significant take-up, even in
secondary and suburban retail, overhanging
properties are beginning to move. The better
suburban shopping malls such as Dundrum,
Blanchardstown, the Pavilions and Liffey Valley are
replacing tenants as soon as units become available”
Chartered Surveyors in Dublin noted a marginal decrease
in yields across all retail categories.
The market for retail space outside the capital differs
from region to region. There are also variations between
urban and rural locations within regions. Chartered
Surveyors reported an overall increase in retail rents per
sq.m in the Leinster region, with the exception of high
street rents which marginally decreased between 2012
and 2013 (-1.5%). Leinster’s most notable rental increase
was for prime city rents which rose by 7.3% between
2012 and 2013.
A similar pattern emerged in Connaught/Ulster, with
rent increases in most retail categories. The exception
being prime city rents which decreased by 17% to €1,507
per sq.m. per annum. The uniqueness of Galway is a
possible explanation for some of the rent increases in
the Connaught/Ulster region.
“In Galway, there is competitive bidding for
available prime space. Rents are well off the peak
but it is a unique market as it benefits from tourism
and the university”
“Retail property is holding up well for prime
properties in main towns and there is better demand
for retail than other sectors of the property market”
Gerard O’Toole, SCSI Western Region Branch Chair
Munster was the only region to have price decreases
across all retail categories in 2013. This, no doubt, reflects
the tough trading conditions in the larger urban centres
in Munster.
“In Cork, retail trading continues to be challenging.
Retail conditions are also quite tough in Limerick
and Waterford. Rents are still falling” Hugh Markey,
Director, Lisney
Rest of Leinster Munster Connaught / Ulster
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
Prime City Rents €325 €303 €374 €555 €779 €907 €974 €1,540 €1507 €1,820 €1,813 €2,055
Town High Street Rents €197 €200 €206 €265 €240 €246 €294 €370 €216 €212 €184 €290
Shopping Centre Rents €276 €267 €328 €435 €289 €366 €383 €470 €379 €300 €260 €275
Other Retail Rents €125 €116 €139 €180 €141 €151 €172 €210 €168 €151 €136 €145
» Retail Yields
Rest of Leinster Munster Connaught / Ulster
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
Prime City Rents 6.9% 6.3% 7.8% 7.5% 8% 7.9% 7.8% 7.4% 8.2% 9.0% 8.5% 7.7%
Town High Street Rents 8.9% 8.6% 8.7% 8.3% 9% 8.8% 8.7% 8.0% 9.4% 9.0% 5.8% 7.7%
Shopping Centre Rents 6.8% 5.6% 7.7% 7.5% 9.9% 9.9% 9.0% 8.9% 9.7% 9.8% 8.4% 7.8%
Other Retail Rents 10% 9.4% 10.4% 9.4% 11.5% 10.7% 9.9% 9.0% 8.8% 8.8% 5.9% 8.5%

Retail yields increased between 2012 and 2013 in
Leinster and Munster but were mixed in Connaught/
Ulster with prime city and shopping centre yields
decreasing while town high street yields increased.
According to industry experts the examinership process
has been used by retailers to negotiate rents.
“The examinership process has been used
extensively by some and if exited successfully
then costs are restructured on the rental side” Ray
This has set a precedent for international retailers
trading in Ireland, according to Retail Excellence Ireland.6
They also predict that many other international retailers
trading in Ireland may now investigate using the
examinership process as a means of escaping upwards
only rents. However, there is a belief that it is a tactic used
by retailers to close unprofitable stores.
“The process of examinership is an approach
being used increasingly by retailers to deal with
unprofitable stores” Chartered Surveyor, Dublin
Three quarters of Chartered Surveyors envisage rent
increases for prime retail properties in Dublin.
» Expectations — Dublin Retail Property Rents
75% 50% 49% 16% 27% 16% 19%
44% 43%
21%
61%
44%
59% 49%
4% 6% 8%
23%
29%
25%
32%
Retail
Warehouses
Neighbourhood
Shopping
Centres
Secondary
City Centre
Streets
City Centre Other Centres
Developments
Major Town
Centre Style
Malls
Prime Retail
(Grafton St.,
Henry St. etc.)
“Rents will start to increase in places such as
Grafton Street, where there is limited supply and
this will put pressure on rents – we are a long way
off a situation where premiums are being paid”
Half of Chartered Surveyors surveyed expect rents to rise
in major town centre malls and City Centre developments.
Retail warehouses are lagging behind other retail
categories with over a third of Chartered Surveyors
expecting a decrease and around half expecting prices to
remain the same.
Opportunities Challenges
Despite improved economic circumstances the retail
sector continues to struggle due to poor consumer spend.
“Retailers are going through a tough time and this
creates challenges for both tenants and landlords.
Consumer spending has slowed and there will be
no major corrections to this” Ray Hanley, SCSI
However, an industry expert has noted an increase in the
quality, volume and nature of retail enquiries from both
6 Source: ‘Examinership-Light’ Proposals signed into law on Christmas
Eve – Irish Times 28/12/13.

local and international retailers which may translate into
greater activity.
“Enquiries are coming from new entrants (both local
and foreign) and indigenous retailers that need
to expand. It’s a good news story” Hugh Markey,
Director, Lisney
“There are expansion opportunities as rents have
reduced by up to 50%. International retailers
are now looking at this as costs have reduced
considerably” Ray Hanley, SCSI Valuations
Professional Group Chair
In the Dublin retail market, over a quarter of Chartered
Surveyors foresee a decrease in the supply of prime retail
e.g. Grafton Street, Henry Street, over the next 12 months.
Just over half of Chartered Surveyors surveyed expect an
increase in the supply of retail properties in secondary
City Centre streets and neighbouring shopping centres
in Dublin.
There is a belief that improvements in the economy have
helped to stimulate the retail property market and that
improvements in consumer confidence will be reflected in
increased consumer spend in the future.
» Expectations — Supply of Retail Properties — Dublin
32% 35% 39% 46% 51% 52% 50%
42%
57%
53%
48%
38% 42% 42%
26%
8% 8% 6%
11%
6% 8%
Retail
Warehouses
Neighbourhood
Shopping
Centres
Secondary
City Centre
Streets
City Centre Other Centres
Developments
Major Town
Centre Style
Malls
Prime Retail
(Grafton St.,
Henry St. etc.)
“There is a view out there that the economy is
improving and retailers want a presence here.
Additionally rents are at a sensible level and are
affordable. Consumer confidence is on the up and
this will translate to the tills in time” Hugh Markey,
Director, Lisney
Discounters are still very active and one retailer is
reported to be looking for 70/80 stores. There is also an
expectation that convenience stores are more likely to be
built than supermarkets.
“There are limited gaps for large supermarkets
and it is unlikely that new shopping centres will be
developed in the short to medium term. Over the
next while there may be extensions to centres rather
than new builds” Hugh Markey, Director, Lisney
However, there are fears that the growth of discounters
and multiples is having an adverse effect on local retailers
outside Dublin.
“The retail market is suffering greater competition
from the multiples and a recent planning application
from Aldi for a 10,000 sq ft store in Bailieborough
will have a huge impact on other businesses,
particularly family businesses locally and in
neighbouring towns” Peter Murtagh, SCSI North
Eastern Region Chair

6:
Industrial
With the Irish economy on the path to recovery,
the Irish industrial market has been boosted
by improved sentiment and improved activity
in the overall commercial property market. In
2013, there was a marked increase in take-up of
industrial space, particularly in Dublin, and this
is expected to continue in 2014.
“Generally there is more activity, greater confidence
and more positive press and this has led to an
acceleration in the take-up of industrial space.
Businesses are starting to do better and this is
having an overall impact”
Vacancy Rates
There is a wide range of vacancy ratios in the industrial
market. The vacancy rate is 12.3% in Galway, 19.7% in Cork,
27% in Dublin and 27.3% in Limerick.7 While supply levels
are high across all regional centres, there is limited supply
of large grade A space in all prime markets.8
Rents Yields
The survey of SCSI members indicates that industrial rents
remained steady across most industrial categories in most
regions. Rents for prime industrial properties in Dublin
under 500m² remained at the same levels at €61 per
sq. m. and these are in line with other industry reports.
Rents in Leinster increased across all categories between
2012 and 2013, particularly secondary rents under 500m²
(+17.4%). In Munster and Connaught/Ulster, rents appear
to have stabilised. However in Dublin, rents appear to be
still in decline, most notably secondary rents.
Industrial yields either remained stagnant or registered a
slight decline between 2012 and 2013. Munster was the
only region where Chartered Surveyors noted an increase
in yields between 2012 and 2013 (an increase of 0.5% in
secondary net yields over 500m²).
Take up in the Dublin Industrial Market was 18% higher in
2013 at 2.87m sq. ft. and the outlook for 2014 is steady
with supply tightening for prime space due to a lack of
construction and increased demand.9
7:
Investment
“There are signs of stabilisation in this market sector
with a notable increase in demand from corporate
occupiers for large lot sizes, expansion of ancillary
logistics companies and strategic purchasing by
some owner occupiers” Eamonn Maguire, SCSI
Commercial Agency Professional Group Chairman
While the vacancy rate remains high, prime industrial
space is in increasingly short supply. As domestic
consumer spending improves and online shopping starts
to increase it is expected that demand will outstrip supply
for well-located modern facilities along some of the
arterial routes out of Dublin.10
» Industrial Rents per sqaure metre per annum at Year End
8:
Pubs Hotels
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
Prime Rents under 500m2 €61 €61 €64 €77 €36 €32 €37 €47 €41 €42 €46 €51 €46 €44 €45 €50
Prime Rents over 500m2 €52 €56 €58 €69 €29 €25 €30 €38 €32 €32 €36 €43 €35 €35 €37 €43
Secondary Rents under 500m2 €37 €42 €46 €56 €27 €23 €26 €35 €26 €26 €33 €39 €28 €29 €31 €33
Secondary Rents over 500m2 €30 €34 €37 €47 €21 €19 €18 €27 €21 €20 €28 €32 €24 €24 €29 €30

Pubs Hotels
This is mainly down to a lack of speculative development
over the last few years. Furthermore, speculative
development is not expected in 2014.
“With leasing actively still sluggish, rents low, lease
term commitments generally short and property
finance difficult, speculative construction is still not
viable” Eamonn Maguire, SCSI Commercial Agency
Development
It is estimated that much higher rents are needed to
justify new builds e.g. €97-€107 per sq. m. for prime
industrial property. As reported, prime rents are below
this level at €61 per sq. m. in Dublin.
“Industrial property continues to be very
challenging and some properties are changing
hands for below build and site costs. There is a
vacancy rate and it will be very difficult to see
any development of industrial properties until
sales prices improve” Trevor McCarthy, SCSI Rural
Profession Group Chair, Southern Region
However, some believe that development will start in 2014
due to a lack of supply of certain industrial categories.
“Oversupply remains an issue in the industrial
market but even here we are experiencing a lack of
supply in certain size categories which will result
in specific building projects in this sector getting
under way in 2014” Ray Hanley, SCSI Valuations
While rents do not justify speculative development
of industrial space, there is some limited construction
activity in this sector.
This is bespoke activity where individual organisations
are developing or upgrading their own premises. The
main activity is in the food sector where specialist
new premises are required by food manufacturers and
distributors: Glanbia is developing a dairy processing
project in Co. Kilkenny, Irish Distillers is developing
a storage warehouse project in East Cork and Pallas
Foods is undertaking their own design and build of a
warehousing and logistics development near Dublin
airport. In the IT sector, Microsoft has applied for planning
permission for an additional data centre in Grange Castle,
Co. Dublin. It is also reported11 that online retailers are
a large growth area which boosted demand for
distribution centres.
“The main demand is from distribution centres,
data centres, which will continue to grow, the food
service sector – processing, distribution and storage,
is a big one, and there is some improvement in the
retail sector. The pharma sector has been active too”
» Industrial Yields
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
% % % % % % % % % % % % % % % %
Prime Net Yields under 500m2 9.0 9.4 9.1 8.6 10.3 11.1 9.8 9.3 10.6 10.7 9.8 9.0 9.5 10.0 9.2 9.0
Prime Net Yields over 500m2 9.0 9.6 9.4 8.9 10.9 11.1 9.9 9.6 11.4 11.1 10.4 9.4 11.0 11.0 11.25 9.7
Secondary Net Yields under 500m2 10.7 10.8 10.2 9.5 11.9 12.4 10.9 10.8 12.7 12.3 11.0 9.7 11.0 11.0 11.7 11.0
Secondary Net Yields over 500m2 11.0 11.4 10.7 9.9 12.2 12.6 11.4 11.4 12.8 12.3 11.1 9.9 12.0 12.0 n/a n/a
7 DTZ Sherry Fitzgerald Irish Industrial Market Review 2013/Outlook 2014.
9 Pauline Daly, Jones Lang LaSalle at the SCSI/IPD Quarterly
Briefing - 28th January 2014.
10 CBRE Irish Commercial Property Outlook 2014.

7:
Investment
Improvements in the Irish economy had a
particular impact on the investment market.
The decline in Irish bond yields and the
upgrading of Ireland’s debt status has boosted
confidence levels among international
investors. Around €1.9bn was invested in the
Irish property market in 2013, which is three
times more than in 2012. In Dublin, prime office
rents are between €350 per square metre and
€377 per square metre in Quarter 1 2014
based on large transactions and a tightening
of supply.
In 2013 there was a huge bounce back in commercial
with around €1.9bn in property sales excluding loan
sales. This was ahead of expectations. There is a
weight of money in the economy. John McCartney,
Director of Research, Savills
This growth in investment accelerated in 2013 and it is set
to grow even further in 2014.
“Investment is improving strongly. It went from
€25m in 2010/2011 to €175m in 2012 and €1.855bn
in 2013. This is a big improvement in the trading of
investment property and this will continue” Roland
8:
Pubs Hotels
The SCSI/RICS Irish Investor Sentiment Index indicates
growth in investor demand in 2013, albeit there was
a slight dip in Q4 2013, due in part to the slower pace
of investor demand growth. This growth in demand is
mainly attributed to the office sector but it also indicates
that investor demand has grown in each sector
through 2013.
Chartered Surveyors and industry experts also reflect this
growth in the investment market in 2013.
This improvement in investor sentiment is reflected in
the SCSI/IPD Ireland Quarterly Property Index at the end
of December 2013. This index measures ungeared total
returns to directly held standing property investments
from one open market valuation to the next. The index
returned 5.7% for Q4 2013.
The index shows increases across all sectors; Retail,
Office and Industrial.
» Investment Market — Investor Sentiment Index
20%
0%
-20%
-40%
Net Balance %
9:
-60%
-80%
-100%
Development 2009 2010 2011 2012 2013
Land

1000 15%
Further SCSI/IPD data shows that the retail, office and
industrial sectors continue to strengthen as investor
sentiment drives returns. Office rents in general grew by
7% in Quarter 4 2013 compared to Quarter 3 2013.
Industrial rents have grown over the last four Quarters and
positive investor sentiment is driving retail returns with
yield impact of +4.6% in Quarter 4 relative to Quarter 3.
“Investment deals were brisk in the Dublin market in
2013 with yields comparing favourably to the bond
market. The star performer has been large office
lot sizes. In the 2nd and 3rd quarters, speculation
over the continuance of the tax break for capital
gains was an important driver in decision making,
though ultimately this tax break was extended in the
Autumn Budget” Eamonn Maguire, SCSI Commercial
Agency Professional Group Chairman
“The retail market started to rebound in the last two
quarters of 2013, which suggests that investors are
starting to look at the retail market”
Colm Lauder, IPD
The chart below indicates that rental value in the office
market in Dublin has been increasing since mid 2011.
This is particularly the case with central Dublin and
Dublin 1, 2, 4 as well as the IFSC and Docklands.
» SCSI/IPD Ireland Quarterly Property Index
-10%
-20%
200
0
-5%
400
-0%
800
10%
600
5%
-15%
Dec 98 Dec 03 Dec 08 Dec 13
Index values (Shaded area)
% return per quarter (lines)
All Property Index All Property Retail Office Industrial
Source: SCSI/IPD Ireland, Results for the Quarter up to December 2013.
» Sector Breakdown - Quarterly Performance
12
10
8
6
4
2
0
-2
-4
Q1 13 Q2 13 Q3 13 Q4 13 Q1 13 Q2 13 Q3 13 Q4 13 Q1 13 Q2 13 Q3 13 Q4 13
Office
Source: SCSI/IPD Ireland Quarterly Index Q4 2013.
Retail Industrial
Income Return Rental Value Growth Yield Impact Total Return

» Rental Value Growth (% quarter-on-quarter), Dublin Submarkets
4
2
0
-2
-4
-8
Dublin 1 South Subarbs Dublin 2 IFSC Docklands Dublin 2 4 (Excl Docklands)
Dublin 4 Central Dublin North Subarbs Blackrock / Dun Laoghaire
“Foreign capital is available for the Irish market and
they are willing to invest in property. This covers
a wide range including Dublin City and offices
in core locations. They are interested in prime
Grade A locations including completed, older and
development sites suggesting new builds” Ray
According to a report on Emerging Trends in Real Estate,12
Dublin is the top spot in Europe for new investments in
2014. This is attributed to Ireland’s economic turnaround,
falling unemployment and a forecast GDP growth of 2% in
2014, as well as the perception that prices have bottomed
out and are beginning to recover.
As reported earlier, almost €1.9bn was invested in the
Irish commercial market in 2013. More than half of
investment spend in Ireland in 2013 originated overseas13
with strong demand from the US, Europe and Asia.
“Overseas investment is buying into the Irish
recovery story” John McCartney, Director of
Research, Savills
There has also been local demand for investment
property. Irish institutions are active in the market again
and there are growing numbers of private individuals and
pension funds with money to invest.
“There is strong domestic demand for opportunities
up to €5m with well funded overseas investors
proving dominant in the larger size categories.
A shortage of investment opportunities in Dublin
is already leading investors to set their sights on
large regional urban centres” Eamonn Maguire, SCSI
Commercial Agency Professional Group Chairman
This domestic demand is starting to spread outside
Dublin for high quality properties.
-6
-10
-12
Net Balance %
Mar 10
June 10
Sept 10
Dec 10
Mar 11
June 11
Sept 11
Dec 11
Mar 12
June 12
Sept 12
Dec 10
Mar 13
June 13
Sept 13
Source: IPD
12 PWC/Urban Land Institute – Emerging Trends in Real
Estate – Europe 2014.

Dublin
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
“The location and the quality of tenants are key.
Investor demand is for good quality property in
Dublin, Cork and Limerick. This is coming from a
combination of local and international investors and
Irish pension funds” Ray Hanley, SCSI Valuations
The expected expiration of the Capital Gains Tax Break
at the end of 2013 also fuelled local investment. This tax
break has now been extended for another year and this is
likely to spur further local investment in the
property market.
“Demand for investment properties was
underpinned by the belief that there has been a
severe over-correction in the property market,
with yields comparing very favourably to the bond
market. Supply and demand in-balances together
with the possible expiration of the Capital Gains Tax
break also fuelled the market in 2013”
Eamonn Maguire, SCSI Commercial Agency
The launch of Ireland’s first two real estate investment
trusts (REITs) in 2013 improved confidence and liquidity in
the market. The REITs are considered an opportunity for
small scale investors to invest in the Irish recovery and to
provide confidence to the market generally.
“REITs are very much viewed by all players as an
important element in the general recovery of the
Irish investment market particularly given their
long term focus” Ray Hanley, SCSI Valuations
The Green REIT raised €300m in August 2013 and the
issue was oversubscribed. The Hibernia REIT raised
€365m from investors on its launch at the end of
2013. Both REITs are targeting commercial properties,
particularly in Dublin.
“Generally the market reaction to the REITs has
been very positive” Ray Hanley, SCSI Valuations
As indicated earlier, demand for investment properties is
spreading outside Dublin and this is the case in Munster
where demand is coming from institutional and corporate
tenants who are investing in medium to large office
buildings. This is beginning to spread to other cities as
competition intensifies in Dublin and Cork.
» Investment prospects 2014 — Dublin
Excellent
Good
Fair
Poor
Very Poor
Year
Source: Emerging Trends Europe Survey 2014

“The investment property market has been more
active in Munster over the last 6 months. This
consists of bank buildings or other large properties
coming to the market. There is good demand in the
€1.5 million to €3 million bracket where there are
institutional/corporate tenants. Demand is coming
from private investors, both local and international.
Local investors are seeing better value in buildings
in urban areas rather than leaving money on deposit
in a bank” Trevor McCarthy, SCSI Rural Profession
Group Chair, Southern Region
Investment opportunities for office space appear to be
limited in South East Leinster and Connaught Ulster.
“There will be not much take up of office space
in 2014. Large offices are very rare in the region
and there doesn’t seem to be any big commercial
opportunities in the investment market” Michael
Boyd, SCSI South East Region Chair
“There are very few investment properties in
Connaught/Ulster” Gerard O’ Toole, SCSI Western
Region Branch Chair
In the regions, there is demand for residential properties
and distressed properties which is mainly driven by
domestic demand.
“There is an appetite for investment in residential
blocks such as apartments. There is a huge
opportunity in residential as there is a shortage in
this area. Demand is not being met by construction
so the rental market is bright with 7%-8% yields. It
is ordinary people who have the potential to invest
and who are investing, as they understand bricks
and mortar” Michael Boyd, SCSI South East
Region Chair
“There is good demand for distressed properties
but these are pulling prices down. Investors are
motivated by price so if they see value, they are
interested. It is mainly driven by domestic demand
as there are always people with money if they see
value. Some high street locations are giving 10%
returns and there is also capital appreciation so
there are good investments out there” Gerard
O’Toole, SCSI Western Region Branch Chair
However, there is some evidence that the banks are
engaged in aggressively selling distressed properties.
“A lot of the activity is the sale of distressed
properties which the banks are ‘aggressively selling’
so there is exceptional value” Gerard O’ Toole, SCSI
Western Region Branch Chair
There is an expectation that distressed properties should
be sold in a contained way, the way NAMA is perceived
to be doing currently, as there are concerns about
aggressive selling.
“NAMA is playing an important role and it is one
of the key stakeholders. However, there should be
no flooding of the market. Currently properties are
being released by NAMA in a measured way and
this should continue” Ray Hanley, SCSI Valuations

8:
Pubs Hotels
In 2013, the tourism sector in general had its
best year since the global economic crisis
began with a 7% increase in overseas visitor
numbers to Ireland up to December 2013
compared to 2012. The government decision
to continue the 9% VAT rate and the abolition
of air travel tax also boosted confidence in
the hospitality sector. The ‘Gathering Ireland
2013’ Ireland’s biggest ever tourism initiative,
consisting of a year-long programme of
festivals, events and gatherings in every part of
the country, was also a significant boost to the
hospitality industry.
This is reflected in notable improvements in the capital
values of licenced premises countrywide. This was
especially the case with hotels and restaurants where
a significant improvement in the percentage change in
capital values was observed.
Within the hotels and restaurants sector, it was only in
Dublin where there was a breakthrough into positive
figures. Capital values for hotels in 2013 stood at +5.5%
in comparison to +0.5% at year end 2012. Restaurants in
Dublin improved from -0.5% in 2012 to +1.4% in 2013.
In Connaught/Ulster, those surveyed recorded the most
substantial improvement. Although, still remaining within
negative figures, hotels capital values improved by 65%
and restaurants by 73.2%. Chartered Surveyors reported
the slowest recovery in Leinster where restaurant capital
values improved by 6.1% and hotels by 10.7%.
9:
Development Land
‘The Gathering’ was a great initiative and it did a
tremendous job in Westport. Failte Ireland are doing
a good job in the West of Ireland, it is much more
competitive now and standards have been raised”
Gerard O’ Toole, SCSI Western Region
Branch Chair
In 2013, the hotel property market was more active than
anticipated. A total of 33 hotels were sold in 2013, with
over one third of these sold to overseas buyers.14
“There has been some activity in the sale of
hotels with quite a few notable sales of distressed
properties. Some hotels are still on the market and
the better ones will see buyers. There has been
overdevelopment and oversupply of hotels and
there needs to be a clear-out of unsuitable stock”
Gerard O’ Toole, SCSI Western Region
Branch Chair
» Licensed Premises % Change in Capital Values at Year End
2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010 2013 2012 2011 2010
% % % % % % % % % % % % % % % %
10:
SCSI Chair Interviews
Prime Pubs in Principal Towns -6.6 -10.2 -9.5 -13.8 -13.3 -19.6 -24.0 -21.6 -10.5 -18.3 -16.4 -24.8 -8.3 -16.7 -32.2 -21.4
Secondary Pubs in Principal Towns -10.3 -12.1 -12.0 -21.7 -15.0 -24.0 -26.8 -26.6 -13.6 -20.0 -18.7 -25.3 -10.0 -21.7 -36.2 -24.0
Prime Rural Roadhouses -7.5 -15.0 -18.0 -25.0 -15.0 -28.6 -30.0 -24.4 -13.9 -18.3 -22.8 -34.5 -15.0 -20.0 -31.6 -24.2
Prime Village Pubs -5.3 -10.4 -13.6 -20.8 -16.3 -25.0 -29.8 -26.3 -13.7 -21.0 -20.3 -28.5 -16.0 -29.0 -31.9 -25.8
Prime Rural Pubs -7.2 -15.8 -2.0 -23.3 -16.3 -25.0 -28.9 -25.8 -15.0 -20.0 -21.5 -30.3 -8.8 -23.0 -32.5 -24.1
Hotels +5.5 +0.5 -2.6 -24.6 -22.5 -25.2 -26.0 -19.9 -11.9 -20.0 -20.5 -37.8 -12.5 -36.3 -45.0 -30.0
Restaurants +1.4 -0.5 -4.0 -16.0 -21.6 -23.0 -20.0 -18.5 -13.0 -20.0 -14.3 -26.6 -7.6 -28.3 -40.0 -24.8

There was also activity in the hotel sector in the main
tourism centres in Munster; Cork, Limerick and Killarney.
“Hotels have been quite active in the last 12 months
with some notable hotel sales in Cork such as the
Fota Island Resort and the Kingsley Hotel. This
demand also extends to Limerick and Killarney”
Trevor McCarthy, SCSI Rural Professional Group
Chair, Southern Region
The survey findings indicated an overall improvement
in the pub space also. However, it seemed hotels had
the most significant improvement in percentage capital
values from 2012 to 2013. The increase in tourism, not
only in Dublin but across all regions of the country,
boosted the hospitality industry.
“There is one large hotel in the market and there
is interest in this. The government was correct to
focus on tourism and this sector is now rebounding.
Not many hotels in the South East region are on
the market but activity will increase here. Even
though pubs suffered a huge shrinkage and are ‘on
the floor’ at the moment, as employment picks up,
people will return to pubs. Pubs are great value
currently” Michael Boyd, SCSI South East
Region Chair
The hotel and pub market strengthened considerably
in 2013. With the exception of the retail sector it was
commonly accepted that the hotel and pub sectors had
been hit the hardest during the economic recession.
According to Chartered Surveyors in the Members
survey, this sector has strengthened substantially
between 2012 and 2013. In Connaught/Ulster, while
still negative, the percentage change in capital values
for prime village pubs improved by 45%. Members in
Leinster noted improvements of 47.5% for prime rural
roadhouses in 2013. Although the percentage change
in capital values still remains firmly within the negative,
overall the growth and improvements within the pub
sector was significant considering the impact of the
economic recession on this industry in particular.
“There have been a number of pub sales over the last
12 months but most of these have been in suburban
areas rather than the City Centre. The pub market
remains quite limited” Trevor McCarthy, SCSI Rural
Professional Group Chair, Southern Region
The market for licenced premises across the country,
primarily in the capital, may be due to the success of ‘The
Gathering’ in 2013, which encouraged increased activity in
this sector.
“Recovery is well under way in the hotel market
in Dublin and the rest of the key regional cities.
Cities have seen an improvement in tourism due
to ‘The Gathering’ and greater flight capacities.
There have been a significant number of hotel
transactions. There is a good depth in buyers and
they are both local and international, though the
larger transactions are by international buyers” Ray
The tourism industry is also expected to grow in 2014
and this bodes well for further improvements in the
hospitality sector. According to the Irish Tourist Industry
Confederation (ITIC), the tourism industry is on course
to deliver 7.5 million visitors to Ireland next year and
between 5,000 and 6,000 new jobs. New air and sea
routes into Ireland and the opening of the Atlantic Way
are expected to be the main drivers of further growth in
this sector.

9:
Development Land
The economic improvement in Ireland is also
having an impact on the development land
market. It is reported that approximately €200
million of non-agricultural land sales15 were
completed in the Irish market in 2013, up four
fold on 2012.
Though there are signs of increased activity in this
market, this is coming from a low base, after years
of inactivity.
“The development land market has only begun
to show signs of activity during 2013 after 5 – 6
years of inactivity” Ray Hanley, SCSI Valuations
This activity in Dublin is being driven by the improving
office market and the increased demand for family
homes. Most of the sites that came on the market were
small infill sites.
In the SCSI survey of members, Chartered Surveyors
were asked to indicate whether the supply of
development sites had increased or decreased in 2013.
Almost three quarters of Chartered Surveyors in Dublin
note an increase in the supply of housing development
sites in 2013.
The supply of office and apartment development sites
in Dublin also increased, according to over half of
respondents.
This activity in the housing and office space for
development sites in reflected in the demand for these
property types, particularly in the capital. Most notably,
the demand for family homes and larger office space in
Dublin has risen considerably in 2013.
“Demand for land, particularly in the office and
residential sectors is likely to encourage vendors
to offer land to the market” Ray Hanley, SCSI
For retail and industrial development land in Dublin, SCSI
members stated that the supply of sites predominantly
remained the same as in 2012.
Outside the capital, it appears that the supply
of development land was greatest for housing
developments. In Munster, 38% of Chartered Surveyors
recorded an increase in the supply of housing
development sites. The supply of apartment development
sites in Munster decreased the most in 2013. This is no
doubt a reflection of the demand for suitable family
properties across the country, as reported in the Society
of Chartered Surveyors Annual Residential Property
Review Outlook 2014.
10:
» Volume of Land Sales 2008 — 2013
9 10
2008 2009 2010 2011 2012 2013
80
70
60
50
40
30
20
10
0
45
Source: CBRE Irish Commercial Property Market Outlook 2014.
23
50
75

29% 33% 38%
31% 38% 31%
14% 13% 73%
50% 44% 6%
39% 61%
24% 25% 51%
42% 54% 4%
31% 62% 7%
11% 59% 30%
30% 50% 18%
46% 46% 8%
11% 39% 52%
Leinster Increase Remain Same Decrease
Munster
Ulster / Connaught
Dublin
Chartered Surveyors in Connaught/Ulster documented no
increase at all in the supply of apartment development sites
in the region last year. In terms of retail development sites,
11% recorded an increase in supply in the Leinster region.
Survey findings also indicated an upturn of 18% in office
development sites in Munster, and a 17% rise in the Leinster
region. Again, this highlights the need for suitable office
space, not solely in the capital but around the country
as well. The survey findings indicate that significantly more
Chartered Surveyors note an increase in the supply of industrial
development land in the Leinster (20%) and Connaught/Ulster
regions (15%) in comparison to Munster (3%).
“There is still a struggle with development land
and this is a reflection of banks not willing to lend
to developers. However, there are some exceptions
in the province and this is in Westport. Westport
is unique as some development land is being sold
and there is also some speculative development,
for example, cash rich speculators who are buying
land at modest prices and trying to get planning
permission. It will be a real strength of the economy
when we see the tower cranes again” Gerard O’
Toole, SCSI Western Region Branch Chair
Some of the main issues with the supply of development
land are the lack of availability of development finance as
well as local authority rates/costs.
“For development land to move, the local
authorities need to address rates and reduce costs”
Michael Boyd, SCSI South East Region Chair
“Significant challenges remain within the sector,
primarily end values in many sectors still being
below replacement cost together with challenges
around bank finance” Ray Hanley, SCSI Valuations
While there are still challenges to overcome, the supply
of land is expected to continue to grow as land values
increase.
“As values gradually improve in the development
land market we are likely to see more land released
by Banks and Receivers in particular” Ray Hanley,
SCSI Valuations Professional Group Chair
» Supply of Development Land in 2013
Housing
Development
Sites
Apartment
Development
Sites
Retail
Development
Sites
Office
Development
Sites
Industrial
Development
Sites
21% 47% 30%
33% 51% 16%
33% 56% 11%
32% 51% 17%
30% 48% 20%
40% 57% 3%
38% 46% 15%
15% 51% 30%

10:
10.1: Dublin
Overview
In the commercial market, there is an acute shortage
of large office space in Dublin City Centre which is real
problem for both FDI and domestic demand, particularly
in the IT and financial services sectors.
There was strong uptake of industrial properties in the
last quarter and whilst speculative construction is still not
viable, there are signs of stabilisation in this
market sector.
Investment deals were brisk in the Dublin market in 2013
with yields comparing favourably to the bond market.
The star performer has been large office lot sizes. In the
2nd and 3rd quarters, speculation over the continuance
of the tax break for capital gains was an important driver
in decision making, though ultimately this tax break was
extended in Budget 2014.
Office Market
With falling vacancy rates in the capital, supply and
demand imbalances are exerting an upward pressure on
rents particularly for the large office lot sizes. With new
office completions having halted in 2011, the supply of
new office stock will not begin to flow for another two
to three years. Such a time lag in the capital is required
for site assembly, navigating the planning process,
completing the construction phase and subsequent
fit-out for occupation.
Both FDI and domestic demand looking to establish
operations here, and existing businesses wishing to avail
of lease break options to occupy more efficient buildings,
are facing fewer options. We are already seeing some
project starts in the capital, a clear indication of how
viable this sector is fast becoming and the opportunities
to be had by early entrants.
There is an opportunity for the key stakeholders such as
NAMA, the banking sector and emerging sources such as
REITs to work closely with developers to either fund or
enter joint ventures to avail of the turnaround in
this sector.
Industrial
With leasing actively still sluggish, rents low, lease term
commitments generally short and property finance
difficult, speculative construction is still not viable.
However there are signs of stabilisation in this market
sector with a notable increase in demand from corporate
occupiers for large lot sizes, expansion of ancillary
logistics companies and strategic purchasing by some
owner occupiers.
Investment
Demand for investment properties was underpinned by
the belief that there has been a severe over-correction
in the property market, with yields comparing very
favourably to the bond market. Supply and demand
in-balances together with the possible expiration of the
Capital Gains Tax break also fuelled the market in 2013.
There is strong domestic demand for opportunities up
to €5m with well funded overseas investors proving
dominant in the larger size categories. A shortage of
investment opportunities in Dublin is already leading
investors to set their sights on large regional
urban centres.
Eamonn Maguire
SCSI Commercial Agency

2014
Activity will continue to grow based on the demands
of FDI and the exporting sectors. Rent levels in some
sectors are either stabilising or have returned to growth
with the prospect of yield compression. Difficulties and
uncertainty within the Euro zone banking system together
with tight credit conditions experienced by SME’s remain
areas of particular concern.
The Commercial Lease Database launched towards
the end of 2013, was a welcome arrival and should in
time prove invaluable to both investors and occupiers,
providing greater market transparency and assisting the
decision making process.
The general outlook is positive with many sectors
of economy improving, and key indicators such as
unemployment decreasing at a considerable pace. Since
Q1 2012 the private sector has been generating 4,600 new
jobs per month in net terms, and total employment has
risen by 3.3% in the last year - a remarkable figure by
international standards.
With Ireland’s economic recovery gaining traction and
with global sentiment towards Ireland improving, there is a
significant weight of international capital yet to be satisfied.
Thus far, investors focus has been on the Dublin office and
residential markets, however this is likely to include retail
and development land during 2014.
The supply of Grade A office space in better locations is
limited and there is a need for new office space to meet
FDI demand which will provide significant opportunities for
developers and investors.
Investment Property
Location and the quality of tenants remain key. As in
the previous year, both the supply of and demand for
investment property remained firmly fixed on the Dublin
market in 2013.
Demand is broadly based and there has also been a
rebound in domestically driven activity. The introduction
of REIT legislation in the Finance Act 2013 has seen the
successful launch of two new REITs - the Green REIT and
the Hibernia REIT - with others likely to follow.
This, in tandem with increased demand from established
Institutions such as Irish Property Unit Trust (IPUT) and
Irish Life, will further underpin an already strong
investment market.
NAMA continues to have an important role to play, they are
one of the key stakeholders and are likely to be much more
active during 2014.
Retail
Retailers are going through a tough time which creates
challenges for both tenants and landlords. Consumer
spending has slowed and although the most recent
consume spending statistics were encouraging we are
unlikely to see any significant change here in the
short term.
As rents have reduced by up to 50% there is value in
certain locations and international retailers are now looking
at expansion opportunities focusing on the better cities and
shopping centres. The examinership process has been used
extensively in this sector and with the change in legislation
will remain a feature of the retail market.
Hotels
There remains a considerable divide between cities and
rural hotels with the metrics for the key city markets of
Dublin, Cork and Galway rebounding during 2013 on foot
of increased tourist numbers which have had have a very
positive impact on REVPAR’s and ARR’s. There have been
a significant number of hotel transactions, with a good
depth of both local and international buyers, although the
larger transactions have been dominated by international
investors thus far.
Development land
Values in the development land sector in the greater Dublin
area improved significantly during 2013 on foot of both
actual and anticipated increase in values in the residential
and office markets in particular. Outside of these locations
values in this sector remain challenged.
2014
The overall picture is of recovery with increasing
employment and a stable interest rate environment.
There is likely to be a much greater focus on development
opportunities, primarily on residential and offices in
key locations. The question now is who will fund these
schemes? There are significant opportunities in this area.
The commercial investment market will continue to be
very active in 2014 and all indications are that the turnover
achieved in 2013 of €1.9bn will be surpassed. However,
residential is a concern primarily due to lack of supply of
houses in the greater Dublin area which is likely to cause
significant upward pressure on house prices.
Ray Hanley
Chair of the SCSI Valuations
Professional Group

10.2: Munster
The office market is showing signs of improvements and
there is a shortage of third generation Grade A offices in
Cork City. To an extent there is a two speed office market
in Cork City. There is activity and some level of demand
for 15,000 to 25,000 square foot office space amongst
international occupiers. This modern office space with
large floorplates is located in suburban areas; Mahon,
Little Island, and the Airport Business Park and this is in
demand by both local and international occupiers. On
the other hand there is a high vacancy of 2,000 to 4,000
square foot of offices in Cork City Centre in general but
this type of space is more suitable to local indigenous
users rather than the national/international occupiers.
Office rents will increase over the next few years.
There is a fear that there will be a shortage of big
floorplate properties as most of these are taken up
and there is no new speculative building with planning
permission in the pipeline.
Industrial property continues to be very challenging and
some properties are changing hands for below build
and site costs. There is a vacancy rate and it will be very
difficult to see any development of industrial properties
until sales prices improve.
The investment property market has been more active in
Munster over the last six months. This consists of bank
buildings or other large properties coming to the market.
There is good demand in the €1.5 million to €3 million
bracket where there are institutional/corporate tenants.
Demand is coming from private investors, both local and
international. Local investors are seeing better value in
buildings in urban areas rather than leaving money on
deposit in a bank.
Hotels have been quite active in the last 12 months with
some notable hotel sales in Cork such as the Fota Island
Resort and the Kingsley Hotel. This demand also extends
to Limerick and Killarney.
There have been a number of pub sales over the last 12
months but most of these have been in suburban areas
rather than the city centre. The pub market remains quite
limited.
On an overall basis, the increase in transactions will
continue but it depends on the type of stock and whether
prices will increase for good quality stock.
In 2014 there will be a higher level of transactions,
however more competitive banking and greater public
confidence is needed.
Trevor McCarthy
SCSI Rural Professional Group
Chair, Southern Region

10.3: Connaught/Ulster
There is limited demand for offices and industrial
property and a broader economic recovery is needed to
drive demand for this type of commercial property in
Connaught/Ulster.
Retail property is holding up well for prime properties
in main towns and there is better demand for retail than
other sectors of the property market. Landlords are
more commercially focused and are willing to absorb
changes to rents and leases – they also tend to be
smarter at dealing with the challenges.
There are very few investment properties in Connaught/
Ulster. There is good demand for distressed properties
but these are pulling prices down. Investors are
motivated by price so if they see value, they are
interested. Some high street locations are giving 10%
returns and there is also capital appreciation so there
are good investments out there. However a lot of the
activity is the sale of distressed properties which the
banks are ‘aggressively selling’ so there is
exceptional value.
There has been some activity in the sale of hotels with
quite a few notable sales of distressed properties.
Some hotels are still on the market and the better ones
will see buyers. There has been overdevelopment and
oversupply of hotels and there needs to be a clear-out
of unsuitable stock.
‘The Gathering’ was a great initiative and it did a
tremendous job in Westport. Failte Ireland are doing
a good job in the West of Ireland, it is much more
competitive now and standards have been raised.
Very few pubs change hands and pubs are not selling
but landlords are finding tenants on attractive terms to
keep them running.
There is still a struggle with development land and
this is a reflection of banks not willing to lend to
developers. However, there are some exceptions in the
province and this is in Westport. Westport is unique
as some development land is being sold and there is
also some speculative development, for example, cash
rich speculators who are buying land at modest prices
and trying to get planning permission. It will be a real
strength of the economy when we see the tower cranes
again.
Overview
It is marginally better now but it is still a challenging
market and we are not out of the woods but there are
local signs of a recovery in West Mayo and Westport.
There is a lot more activity in the private market with
the sale of distressed assets. The impact of this remains
to be seen but it is likely to have a further impact on
price; at least there will be more activity. Until the bank
situation is addressed the economy will remain sluggish.
Gerard O’Toole
SCSI Western Region
Branch Chair

2014 Commercial Property Review Highlights Tightening Office Markets and Growing Investment

2014 Commercial Property Review Highlights Tightening Office Markets and Growing Investment

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