THE IRISH COMMERCIAL PROPERTY
MARKET OVERVIEW
Marie Hunt, CBRE
June 20th 2013
PREPARED FOR
AGENDA
• The Occupier Markets
− The Office Market
− The Retail Market
− The Industrial Market
• The Investment Market
• The Hotels & Licensed Market
• The Development Land Market
• Loan Sales
Presentation to PRAI– June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
2
THE OFFICE MARKET
Growth in Dublin Office Stock
Growth in Dublin Office Stock | 2004 - 2013
Development Completions
Stock
120
100
4.0
80
3.5
60
3.0
40
2.5
20
0
Q4 2004
Q1 2005
Q2 2005
Q3 2005
Q4 2005
Q1 2006
Q2 2006
Q3 2006
Q4 2006
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
2.0
Completions – Sq M ‘000
Stock Level - Millions Sq M
4.5
SOURCE: CBRE, Q1 2013
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
3
THE OFFICE MARKET
Prime Rents | 56% Peak to Trough Decline
Prime Dublin Office Rents | Q1 2000- Q1 2013
SOURCE: CBRE, Q1 2013
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
4
THE OFFICE MARKET
Take-Up vs. Vacancy
Dublin Annual Office Take-Up vs. Vacancy | 2004 – Q1 2013
SOURCE: CBRE, Q1 2013
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
5
THE OFFICE MARKET
City Centre Office Vacancy
Dublin City CBD Vacancy Rates | Q1 2013
30%
Dublin1/3/7 Overall
Grade A Vacancy Rate
Overall District Vacancy Rate
28.49%
25%
Dublin 1/3/7 Grade A
23.31%
20%
Dublin 6/8 Overall
17.62%
15%
16.26%
Dublin 2/4 Overall
14.07%
17.36%
IFSC Grade A
Dublin 6/8 Grade A
10%
City Centre Overall
IFSC Overall
10.40%
10.54%
City Centre Grade A
10.19%
Dublin 2/4 Grade A
6.16%
5%
0%
SOURCE: CBRE, Q1 2013
Presentation PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
6
CBRE PRIME RENT SERIES
Peak
June 2013
Trending
Prime Rent
Prime Rent
€ per sq m
€ per sq m
10,000
7,500
4,500
4,500
4,000
3,500
Stable
Stable
Weaker
3,900
2,800
3,000
2,000
Stable
Weaker
360
320
215
80
Stable
Weaker
673
377
296
270
306.7
194
172
135
Stronger
Stable
Stable
Weaker
130
100
90
60
37
33
Stable
Stable
Weaker
RETAIL
SHOPS
Prime High Street Zone A
Good Secondary High Street Zone A
Prime Provincial High Street
SHOPPING CENTRES
Prime Zone A
Secondary Zone A
RETAIL WAREHOUSES
Prime
Secondary
OFFICES
Prime City Centre Dublin
Secondary City Centre Dublin
Suburban Dublin
Prime Provincial
INDUSTRIAL
Prime Dublin
Secondary Dublin
Prime Provincial
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
7
THE OFFICE MARKET

Continued activity from existing occupiers and new entrants…

Overall level of demand robust…40 transactions signed in Q1…

Some rental growth emerging for prime although aggregate relatively stable…

Incentives starting to shrink…

Some improvement in the availability of funding ….

An increase in corporates buying premises…

An increase in refurbishment projects and pre-planning discussions although
no speculative development anticipated for some time yet…

Continued gradual decline in the overall rate of vacancy…

Change of planning regime in Dublin Docklands…

Increased transparency due to new national database ?….
Presentation to PRAI– June 2013
Presentation
to NTMA
CBRE ANALYSIS | Office
Availability & Vacancy Rates | May 2013
8
REGIONAL HIGH STREET VACANCY
Galway - Main…
Galway - Shop…
Q3 2012
Q1 2013
Belfast - Arthur…
Killarney - Main…
Galway - High…
Kilkenny - High…
Killarney - New…
Galway -…
Dublin -…
Belfast -…
Dublin - Grafton…
Cork - St…
Sligo -…
Limerick -…
Sligo -…
Belfast - Castle…
0%
5%
10%
15%
20%
25%
30%
Vacancy Rate
Presentation to PRAI– June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
9
THE RETAIL MARKET

Some improvement in this sector over recent months as consumer confidence
starts to stabilise but conditions still challenging…

Vacancy levels a concern, particularly in provincial locations…

Good demand from existing retailers and new entrants although largely
focussed on core locations….

Greater focus on developing multi-channel offerings as online sales escalate…

Competition for the best pitches intensifying due to lack of new accommodation
coming on stream…

Potential for some limited rental growth in key locations although aggregate
remaining relatively flat….

Rates now more topical than rents for many retailers…
Presentation to PRAI– June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
10
THE INDUSTRIAL MARKET

Strong demand from a range of specialist occupiers, particularly for
prime buildings…

Greater incidence of occupiers purchasing premises, instead of
renting…

A number of significant land sales in negotiation …

No speculative development anticipated other than ‘design & build’…

Rental values beginning to stabilise…

Pricing not the key driver of location decisions…

Short lease terms the norm…..

Multi-channel retailing boosting the demand for logistics and distribution
facilities…
Presentation PRAI– June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
11
€ Millions
IRISH INVESTMENT SPEND 2006 – Q1 2013
3,500
98
Overseas
3,000
Domestic
Undisclosed
2,500
79
2,000
1,500
1,000
35
26
500
27
21
8
13
0
2006
2007
2008
2009
2010
2011
2012
2013.1
Presentation to PRAI– June 2013
Presentation
NTMA
CBRE ANALYSIS | Office Availability
& Vacancy to
Rates
| May 2013
12
INVESTMENT INTO IRELAND 2012
Over €545m of transactions > €1m signed in 2012
35 transactions > €1m
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
13
ANALYSIS OF IRISH INVESTMENT SPEND Q1 2013
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
14
IRISH TOTAL RETURNS & CAPITAL GROWTH
5
Total Return
Capital Growth
0
%
(5)
(10)
(15)
Q1 2013
Q4 12
Q3 12
Q2 12
Q1 12
Q4 11
Q3 11
Q2 11
Q1 11
Q4 10
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Q1 09
Q4 08
Q3 08
Q2 08
(20)
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
15
CBRE IRELAND EQUIVALENT YIELD SERIES
Peak
June 2013
Trending
Yield %
Yield %
2.50
3.50
3.25
5.75
7.00
8.00
Stronger
Stronger
Stronger
3.50
4.25
7.50
9.50
Stronger
Stronger
4.25
5.00
7.75
11.00
Stronger
Stronger
3.75
4.25
5.00
5.75
6.25
7.75
8.75
9.50
Stronger
Stronger
Stronger
Stronger
4.75
4.75
5.75
8.75
10.75
12.00
Stronger
Stronger
Stable
RETAIL
SHOPS
Prime High Street
Good Secondary High Street
Prime Provincial High Street
SHOPPING CENTRES
Prime
Secondary
RETAIL WAREHOUSES
Prime
Secondary
OFFICES
Prime City Centre Dublin
Secondary City Centre Dublin
Suburban Dublin
Prime Provincial
INDUSTRIAL
Prime Dublin
Secondary Dublin
Prime Provincial

Prime Yields refer to an equivalent yield for a prime (well specified, well-located and rack-rented) property let to a strong
tenant(s), on a lease with 10 years unexpired and open market rent reviews (upwards or downwards)
Presentation
– June&2013
CBRE ANALYSIS PRAI
| Office Availability
Vacancy Rates | May 2013

Prime Provincial refers to Cork, Galway, Limerick and Waterford only.
16
THE INVESTMENT MARKET

Continued strong international appetite for prime investment opportunities and
portfolios…

Domestic investors dominant but mainly for secondary and provincial
opportunities…

Primary attraction is re-pricing from peak and the relative attractiveness of
yields…

IPD series moving back into positive territory…

New sources of funding from overseas boosting liquidity…

Continued polarisation …

Potential for prime yields to harden further due to the weight of money…

Potential for secondary yields to soften further…

More loan sales activity anticipated …
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
17
IRISH HOTEL SPEND 2006 - 2013
32
1,000,000,000
800,000,000
€
10
26
600,000,000
400,000,000
200,000,000
24
2
3
8
2009
2010
2011
3
0
2006
2007
2008
2012
Q1 2013
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
18
INVESTMENT IN HOTELS IRELAND 2012
Over €146m of hotel sales in 2012 in 24 transactions
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
19
THE HOTELS & LICENSED MARKET

More hotel and pub properties coming to the market…

Demand from international buyers primarily focussed on Dublin…

Domestic buyers focussed on provincial opportunities…

An increase in pub properties going into receivership and ultimately being
released for sale…

Increase in refurbishment projects …

2 new hotels opening in Dublin in 2013 but several hotel projects planned…

Demand focussed on properties in Dublin 1,2 and 4 and profitable hotels in
Cork, Galway and Kilkenny…

Improvement in funding, both from domestic banks and overseas…

The Gathering 2013….
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
20
Millions
DEVELOPMENT LAND SALES 2008 – Q1 2013
350
45
300
250
200
150
100
50
50
5
10
23
2010
2011
16
0
2008
2009
2012
Q1 2013
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
21
THE DEVELOPMENT LAND MARKET

Continued volume of both greenfield and brownfield land coming to the market …

An increase in owner-occupier demand …

Demand primarily local although some international investors buying sites…

Demand particularly strong for sites priced below €500,000…

An increase in the number of license and joint venture transactions

Strongest demand for:
•
Sites with planning for up to 50 houses in Dublin
•
Sites in good locations that suit discount retailers
•
Partially-complete residential developments in good locations
•
Sites in Dublin city centre that could accommodate student housing
•
Strategic sites that meet the requirements of corporate occupiers wanting to develop bespoke
facilities
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
22
COMPLETED LOAN SALES IRELAND 2012
Vendor
Date
Name
Buyer
Loan €m
Discount
Location
Kennedy
Wilson &
Deutsche Bank
€360.0
83%
Ireland
Pepper Home
Loans
€600.0
60%
Ireland
Kildare
Lone Star
€650.0
60%
Ireland
(90%) & UK
(10%)
Nov 2012
Pittsburgh
CarVal
€380.0
75%
Ireland
Nov 2012
Lane
Apollo
€1,800.0
90%
Ireland
Lloyds
Jun 2012
GE Capital
Aug 2012
AIB
Oct 2012
Lloyds
Lloyds
Prince
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
23
2012 GLOBAL LOAN SALES COMPLETED
37% of €9.79bn (Original Loan Value) in 2012 comprised Irish assets
Approximately €836 million paid for Irish Loans in 2012
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
24
LOAN SALES IRELAND 2013
Vendor
Date
Name
NAMA
May 2013
Aspen
NAMA
2013
Club
Lloyds
2013
?
NAMA/IBRC
2013
Delta
Buyer
Starwood
Capital/Catalyst
Capital/Key
Capital
Consortium
(80%) & NAMA
(20%)
Loan €m
€800 m
Discount
c.75%
Location
Ireland
?
Presentation to PRAI – June 2013
CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013
25
Stages of a Property Market Cycle
Source | Homer Hoyt – 100 Years of Land Values in Chicago
QUESTIONS?
Marie Hunt
Executive Director, CBRE
Tel
+ 353 1 618 5543
Email marie.hunt@cbre.com
Presentation to PRAI – June 2013
Presentation
to NTMA
CBRE
ANALYSIS | Office
Availability & Vacancy Rates | May 2013
27