Business Plus

Challengin­g Outlook For Ageing Office Stock


Despite eurozone annual inflation coming in at 4.1% in October, the signal from the European Central Bank is that it has no intention of raising interest rates in 2022. Not all investors believe that, but institutio­nal capital holds the view that the Private Rented Sector is the place to be for yield.

In its interim results statement, Hibernia REIT plc reported that there is €3.5bn of capital looking to deploy into PRS in Ireland. PRS accounted for 54% of commercial property investment through the first nine months of 2021, with an estimated €1.9bn invested across a range of schemes. The lure is yields of 3.65% to 4.25%, which are more attractive than the negative or tiny yields on sovereign bonds.

Average unit prices paid by the cuckoo funds this year is substantia­l. Estate agent Knight Frank calculates €460k per unit at Royal Canal Park in D15; €450k at a Dwyer Nolan developmen­t in North Dublin; €520k at Griffith Wood in Drumcondra; and €430k at Clay Farm in Leopardsto­wn.

In the Dublin office market, Hibernia notes a divergence in the performanc­e of prime and secondary assets. Prime office rents average €57.50 per square foot, and yields are stable, at 4.0%. However, the yield in secondary properties has drifted by 50 basis points in the past six months, to 5.25%, as occupiers increasing­ly favour more modern and sustainabl­e buildings over secondary alternativ­es. Hibernia REIT has taken note. Its 160,000-square-foot developmen­t at 1-6 Sir John Rogerson’s Quay – a six-storey office building with retail at ground level – is constructe­d to a LEED platinum standard.

Dublin office take-up in January to September 2021 was c.30% lower than in the same period in 2019, though CBRE reports that leasing activity in Q3 was on par with the volume of transactio­ns recorded two years previously. Including traditiona­l, redbrick space, Hibernia believes the office vacancy rate in the capital is 10.5%, up from 8.9% in September 2020. The Grade A vacancy rate in the city centre is 11.1%, compared to 9.1% a year ago.

Coming down the tracks in Dublin is 7.3m sq. ft of gross new office space, to be delivered between 2021 and 2024. Hibernia notes that 3.1m sq. ft under constructi­on will be looking for tenants.

 ?? ?? Old and new on Sir John Rogerson’s Quay
Old and new on Sir John Rogerson’s Quay

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