IRELAND SNAPSHOT - Colliers International
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IRELAND SNAPSHOT AUGUST | 2020
2 3
ECONOMY
The Irish economy is moving in line with other An additional EU wide €750 billion recovery fund was
advanced economies and poised for a ‘V’ shaped approved on July 21st along with the €1.1 trillion 2021
recovery already evident in Irish purchasing manager – 2027 EU Budget. On July 23rd, Dublin approved a
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
indices. The Irish composite PMI fell to 17.3 in April new €5.2 billion domestic stimulus package including
before recovering to 25.7 in May and 44.3 in June. extension of employment protection schemes to
Further improvement was recorded in July in line with March 2021, a 2% VAT reduction, an increase in
the Eurozone as a whole (54.9) with the Irish PMI Help to Buy supports from a 5% (€20k) limit to
(55.9) suggesting economic growth for the first time 10% (€30k). This supplements the €2 billion Credit
since February. Total claimants on the combined Live Guarantee Scheme. Aside from second wave virus
Register, the PUP and TWS scheme fell by 87,999 concerns, risks include Brexit and EU tax initiatives.
in April to 922,696. This is down by over 20% since Nevertheless, the latest GDP forecasts (Oxford
the peak of 1,177,937 in April. Like the PMI data, this Economics, July) show a tech sector insulated Ireland
data also suggest a rebound as pandemic restrictions outperforming the G7 with annual growth averaging
continue to be eased and people return to work. The 1.9% though 2024.
financial environment remains supportive.
Colliers view: Ireland will outperform G7 economies over the next 5 years with annual growth of 1.9%.
The key downside risks are a ‘second viral wave’, Brexit and EU tax reform.
INVESTMENT MARKETS
A phenomenal end to 2019 with momentum carried border investor demand may explain the stability of
over into Q1 has given way to a pandemic induced the Irish market. Offices re-asserted its position as
decrease in transactional activity in Q2. Nevertheless, the most sought after sector attracting some €260
the ‘Covid-19 Quarter’ saw €430 million in investment million in capital, followed by Hotels (€65 million) and
with another €650 million of unfinished business PRS/residential (€64.5 million) and Industrial (€27
going into Q3. Though much reduced compared to million). Cross border investors continue to dominate
recent quarters, this level falls in the range of normal with a 75%+ market share in Q2 and include German
quarterly volatility. Hence, Q2 volumes, though (DEKA, GLL), French (Corum) and UK (M7) investors.
reduced, belie the formidable pandemic impact on Likewise, KanAM (German) and Amundi (French)
the general Irish economy. Given unlocking and are reported to have another €230 million in deals
improved access to assets for inspections, increased pending.
volumes are expected in Q3. Despite domestic Brexit
worries, Ireland remains in the cross-hairs. Cross
TOP FIVE DEALS Q2 LOCATION SECTOR PRICE ACHIEVED BUYER
Bishop’s Square Dublin 2 Office €181.6 million (4.01%) GLL (German)
Clayton Hotel, Char- Dublin 2 Hotel €65 million (4.25%) DEKA (German)
lemont
Off-Market Dublin PRS €51 million (n/a) P&C
Riverside One Dublin 2 Offices €37.5 million (n/a) IPUT (Domestic)
Off-Market M50 Industrial €20.7 million (n/a) M7 (UK)
4 5
Retail: Retail sector activity remains very limited. all retail and mixed use assets amounted to a modest
Most retail assets that traded in Q2 were part of €12 million. The appetite for retail and leisure assets is FIGURE 1: Eurozone UK US Ireland China
larger mixed use schemes generally limited in value. limited, given their direct exposure to pandemic risks. COMPOSITE PMI
INDEX 60
A private investor purchased a unit in Smithfield Yields continue to rise, a trend that began over a year
(16,191 sq ft) with Fresh on the ground floor and ago with shopping centres and retail warehouses.
Brown Bag offices above with a WAULT of 13+ years Even prime central Dublin yields have been buffeted. 50
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
for €4.6 million at a 6.47% IY. Generally, food and Nevertheless, the transactional tide may begin turning
convenience good stores have remained of interest in Q3 as Hammerson, which has been under financial
40
given more resilient trading against both the pandemic pressure, may offer the sale of a share in Dundrum
and e-commerce. In Q2 the total transactional value of Town Centre shopping centre.
30
SELECTED RETAIL TRANSACTIONS VALUE YIELDS
Fresh, Smithfield €4.6m 6.47% (Dublin) 20
10
Offices: Office yields remained stable in the early demand for prime assets. GLL (Germany) purchased
part of the pandemic with Central Dublin office yields Bishops Square at 4.01% NIY reflecting this demand.
0
compressing by 4 bps and provincial offices rising by Furthermore, 28 Fitzwilliam Street is reported to
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20
2 bps in Q1 (MSCI). Over the course of Q2, demand be under offer to Amundi (France) for €170 million
conditions remained favourable despite the pandemic, at a sub 4% NIY. Brexit concerns are returning as
Source: IHS Markit, Trading Economics
the economic shutdown and reduced transactions. pandemic fears moderate, but transactional evidence
Nevertheless, yields slipped outwards by 4 bps in shows that Brexit may be supporting investor interest
Q2 and by a more substantial 18 bps for provincial in Dublin, especially as comparative prime office yields
offices. Colliers data suggests that prime yields were in Eurozone remain extraordinarily low.
generally stable reflecting ongoing steady cross border
SELECTED OFFICE TRANSACTIONS VALUE YIELDS
Bishops Square (Q2) €181.6m 4.01% (Dublin 2)
28 Fitzwilliam Street (pending) €170m Sub-4% (Dublin2)
Riverside One €37.5m N/A (Dublin 2)
FIGURE 2: Feb forecast July forecast
ANNUALISED GDP
FORECASTS 2019 3%
TO 2024
1.9%
Industrial: Like other sectors, Irish industrial market share of the 240,000 sq ft warehouse in 2014. Yield 2%
1.4%
transaction volumes remain subdued in Q2. Total evidence remains thin although a reasonable amount
1.2%
1.1%
1.0%
transaction volume in Q2 amounted to €27 million, of product is on the market in Q3, valued at around
0.8%
0.6%
1%
including M7’s off-market purchase of a 18 unit €6.3 million (excluding numerous off-market deals)
0.1%
portfolio across the M50 for a reported €20.7 million with yields ranging from 5.7% in Dublin (mix of vacant
and IPUT’s acquisition from Aviva of the remaining and tenanted units) to 11.5% in Waterford (detached 0%
Ireland US Advanced UK France Germany Japan Italy
50% stake in Unit D, KiIcarberry Distribution Park 68,500 sq ft unit). Until more new build projects and
for €5.8m at 5.40% NIY. The acquisition gives IPUT stock is added to the market, a substantial increase in
full ownership, having acquired the original 50% transactional activity will remain restrained.
Source: Oxford Economics, February & July 2020
SELECTED INDUSTRIAL TRANSACTIONS VALUE YIELDS
Unit D, Kilcarberry Distribution Park (50%) €5.8m 5.40% (Dublin)
Portfolio (18 units) €20.7m N/A (M50)6 7
FIGURE 3: 1 Quarter 1 Year
EQUIVALENT YIELD
SHIFTS
Industrial - SE Dublin
Office - Central Dublin
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
Industrial - SW Dublin
Industrial - North Dublin
Retail Warehouse
Retail - Other City Centre
Retail - Shopping Centre
Retail - Grafton Street
Retail - Henry/Mary Street
Retail - Provincial
Office - Rest of Dublin
Office - Provincial
-0.5% 0% 0.5% 1% 1.5%
Alternatives / Other: The alternative sectors in Dublin 18 might attest. The deal was agreed at a
continue to see steady, if reduced, activity in Q2, led reported yield of 5.28%. Likewise, Kennedy Wilson
Source: MSCI Quarterly Index, Q2
by the sale of the Charlemont Hotel (187 beds) in (US), after completing the Clancy Quay rental scheme,
Dublin 2 for €65 million to DEKA/Dalata (German/ the largest private sector PRS development in Ireland,
Irish) at an unconfirmed headline 4.25% IY. Hotel has launched a new $2 billion debt platform targeting
yields tend to be very asset specific, but a general Irish, UK and US real estate. Also in Q2, a €1.75
FIGURE 4: May-20 Jun-20
softening of prime assets of between +25bps to million Medical Centre was sold to a private investor
RETAIL SALES
+100bps depending on location and quality is generally at 8.4% IY in Cork. Another four primary care assets GROWTH IN 3 MONTHS 100%
recognised. The second largest deal was a €51 million are understood to be under offer in Q3 for €4.1 million TO END MAY/JUNE
off-market PRS deal in Dublin. Ireland continues to at 8.4% IY. No new student housing sales have been
benefit from an estimated €7 billion in institutional reported in Q2 after a busy few quarters, but the 54%
50%
capital targeting PRS/BTR projects (Investec). Dublin appetite for these and other alternative assets remains
remains the focal point for this activity as the recently strong.
agreed €130 million forward funding of 295 units 15% 15% 12% 18%
0%
-0%
-27% -26%
SELECTED ALTERNATIVES/OTHER TRANSACTIONS VALUE YIELDS
Clayton Hotel €65m 4.25% (Dublin 2) -50%
-31% -78% -55%
PRS forward funding €130m 5.28% (Dublin 18)
Medical Centre €1.75m 8.4% (Cork)
-100% -91%
Colliers view: Investment in Irish property is subdued, but activity levels suggest sustained demand. Look for
a substantial uptick in Q3, unless another lockdown occurs.
-150%
Food Non-food Household Text, cloth Bars All Retail
& foot
Source: Central Statistics Office8 9
OCCUPIER MARKETS
Q2 2018 | South East Offices | United Kingdom
Research & Forecast Report | Colliers International
Retail Like other pandemic affected economies, consumer sales performance improved and volumes are up by
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
spending and the physical retail sector has been hit 3.6% y/y as Phase 3 of the unlocking began. Store
hardest. Retail sales fell by 11% y/y in March, followed closures have included Debenhams, Laura Ashley,
by a 44% y/y collapse in April and another severe fall Monsoon, Mothercare and others already impacted by
of 26% y/y in May as a phased reopening of shops e-commerce. These closures will impact further on
salvaged some performance. Comparison goods retail rents which have been on a weakening growth
suffered the most, convenience goods fared better trend since 2017. In the year to end June, rents fell
and food sales volumes increased, up by 15% over by 2.1%. Despite the June re-openings and various
the three months to the end of May, in contrast to landlord concessions, the die appears to be cast for
the retail sector as a whole which fell by 26%. June further rental reductions.
Colliers view: The rental tenor of high streets including prime districts is set to change as new entrants and
formats begin to replace traditional household names.
Offices Ireland’s pre-pandemic services PMI reached 59.9 in Hence, the outlook for the rest of 2020 and into 2021
February, collapsed to 13.9 in April and rebounded looks positive as stalled demand recovers. The City
to 39.7 in June - a classic, if incomplete ‘V’ shape. Centre vacancy rate remains low at 6% and significant
Despite June’s modest rebound, overall take-up in increases in sublease space is not apparent.
Q2 fell to a record low of 75,000 sq ft across 12 Furthermore, over half of stock under construction
deals focused (85%) on Central Dublin. Given strong is pre-committed. Given these market dynamics,
Q1 take-up of 1,150,000 sq ft, the total for H1 20 little evidence of significant change in office rents is
compares favourably to H1 19, but Q2 take-up was apparent. Prime quoting rents remain at €65 psf in
down by around 90% against Q1 reflecting the full the CBD and €32.50 psf in the suburbs. Transactions
impact of the lockdown and the inability to complete of note in Q2 include: 3M Digital’s pre-let of 24,000
transactions, as well as a general ‘wait and see’ sq ft at 2 Cumberland Place (construction delayed),
approach by many prospective tenants. The tech, Amyrt Pharma taking 8,200 sq ft at 45 Mespil Road
pharma and financial sectors are still active among and Unity Technologies agreement for 7,600 sq ft at
others and in total around 700,000 sq ft of space was 33 Sir John Rogerson’s Quay.
reserved across 44 deals going into Q3.
Colliers view: A pipeline of delayed deals and outstanding requirements will produce stronger take-up in H2.
Industrial Irish industrial activity held up much better than particularly for larger-sized units which can only be
the services sector over the lockdown. June’s accommodated through design & build. The shortage
manufacturing PMI reading confirmed a recovery has been aggravated by construction site shutdowns.
back to February’s pre-pandemic level (51.0) and Nevertheless, new design & build and speculative
July showed an acceleration of activity (57.3). From a schemes are once again in the works, but even if
commercial property perspective, the logistics sector delivered at pace, will not change in the short term
has seen a steady transactional flow throughout the the fundamental supply/demand imbalance and rental
lockdown, partly due to ecommerce, with numerous tone. Hence, unlike other commercial segments, the
short-term requirements arising from the retail sector pandemic has supported rents. MSCI reported that
and final mile delivery operators, and partly due to despite the March lockdown rental growth accelerated
ongoing planning for year-end Brexit contingencies. modestly by 0.4% q/q in Q1 and remained stable in
The largest deal in Q2 was a 140,000 sq ft letting Q2 showing positive growth of 0.1% q/q. Interestingly,
in Park West Industrial Park, Dublin 12 to Silent- M7 Real Estate, having assembled a significant Irish
Aire, an engineering company specialising in data industrial and logistics portfolio over the last three
centre cooling. This was followed by a 70,267 sq years, has taken a lease on offices in Dublin 4 for
ft let in Northwest Business Park to the logistics own occupation. An acceleration in industrial space
operator GLS. Rental levels reflect this steady development looks increasingly likely.
demand, but also the endemic lack of quality space,
Colliers view: The industrial sector will continue to weather the pandemic better than other sectors. Look for
increased development to support ecommerce and for Brexit planning.10 11
FIGURE 5: Retail Office Industrial
RENTAL GROWTH
15%
Hotel Overall activity across the sector has been in tourism which accounts for 70% of hotel stays is not
abeyance given that hotels were among those sectors likely to recover quickly, despite possible relaxation 10%
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
August 2020 | Ireland Snapshot
Research & Forecasting Report | Colliers International
in the direct line of fire from the pandemic lockdown. of travel with the publication of ‘green lists’. So far,
5%
In June, Dublin and Provincial RevPAR was down domestic tourists are also showing reluctance to use
by over 90% y/y at between €10.00 to €11.00 with hotels which has given rise to tax breaks to support 0%
occupancy rates at less than 15%. Occupancy has an Irish holiday at home scheme. Conditions will
improved in July, but remains low at between 35% improve over the course of H2 20, but operators as a -5%
to 40%. Aggregate earnings for the tourist sector as whole, whether domestic or international-facing, are
-10%
a whole is expected to fall this year by at least 75% resting hopes on further government support. Despite
amounting to a €7 billion shortfall. The tourism sector a chronic shortage of hotels in Dublin, new hotel
-15%
employs over 10% of the Irish workforce. International developments will have difficulty finding funding. Jun-00 Jun-04 Jun-08 Jun-12 Jun-16 Jun-20
Colliers view: Hotel sector recovery, both domestic and international facing, will be linked to pandemic
progress and enhanced support from the Irish government, but a significant upturn may await St Patrick’s
Source: IPD Quarterly Digest, Q2
Day (March 2021) - the traditional start of the Irish tourist season.
Residential Prior to the pandemic and lockdown, residential falls of between 5% to 10% is anticipated in the sub
property price growth was showing signs of greater €300,000 mass market, there is yet little statistical
stability after a long period of gradual cooling. In evidence. However, transaction volumes have
February, all property growth fell to a sustainable changed dramatically. Transactions fell from a peak
1.0% y/y national rate. Outside of Dublin, growth of 6,846 in December 2019 to 2,829 in May, a 60%
registered 2.2% y/y and in Dublin it was flat at 0.0% decrease. Clearly, supports for the housing market in FIGURE 6: All (ex-Dublin) Dublin
y/y. The pandemic has not changed these pricing the government’s stimulus package were no surprise RESIDENTIAL
dynamics greatly. By May, the annual rate of growth given the role that housing plays in supporting the
PRICE GROWTH 30%
nationally was 0.3% y/y, outside of Dublin 0.7%y/y consumer part of the economy. per annum growth
and in Dublin -0.1% y/y. While an expectation of price
20%
Colliers view: House prices remain stable, but activity has slowed dramatically. Until activity normalizes,
price movement will be hard to predict. Look for continued government stimulus to restore market churn.
10%
0%
-10%
-20%
-30%
May-12
May-14
May-16
May-17
May-18
May-19
May-20
May-15
May-13
May-11
Source: Central Statistical OfficeFOR MORE INFORMATION
Declan Stone HOTELS AND LEISURE CONSULTANT
Managing Director
Weldon Mather
declan.stone@colliers.com
Head of Hotels & Leisure | Valuation & Advisory
+353 1 633 3732
weldon.mather@colliers.com
+353 86 868 4441
CAPITAL MARKETS
Michele McGarry ADVISORY SERVICES
Director
Emmett Page
michele.mcgarry@colliers.com
Director
+353 1 633 3738
emmett.page@colliers.com
+353 1 633 3725
BUSINESS SPACE
Nick Coveney RESIDENTIAL
Director
Marcus Magnier
nick.coveney@colliers.com
Director
+353 1 633 3736
marcus.magnier@colliers.com
+353 1 633 3785
Paul Finucane
Director
RESEARCH & FORECASTING
paul.finucane@colliers.com
+353 1 633 3724 Walter Boettcher
Head of Research and Economics
RETAIL walter.boettcher@colliers.com
+44 20 7344 6581
Aiden McDonnell
Consultant
aiden.mcdonnell@colliers.com
+353 1 633 3722
Hambleden House
This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the
property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation 19-26 Pembroke Street Lower
to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other
purposes. This report does not constitute and must not be treated as investment or valuation advice or an offer to buy or
Dublin
sell property.
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