Key Commercial Property Predictions for 2022
Marie Hunt (pictured), Executive Director, CBRE Ireland, reviews the outlook for Ireland’s commercial property market this year
Following a strong second half in 2021, CBRE expects to see continued momentum in transactional activity in all sectors of the Irish property market in 2022. Although the legacy of the pandemic will remain with us for some time, the strength of investor, developer and occupational demand is encouraging. Even sectors that have been severely impacted by Covid-19 should see transaction volumes revert to 2019 levels over the next 12 months. A key theme for 2022 will be increased focus on sustainability. ESG and taxonomy is now the lens through which occupation, development, investment and funding decisions are made and we expect 2022 will mark a step change in ESG becoming an integral factor across the full range of real estate decisions. As the year progresses, we will see increasing evidence of a green premium (Greenium) for assets that display the best ESG credentials. We will see several investors reorienting their property portfolios and reducing exposure to certain types of real estate in favour of other sectors or building types, with much of this strategic change influenced by concerns about ESG.
Key Predictions for 2022
2022 will see increased appetite for alternative investments. In addition to demand for traditional office, industrial and logistics, residential and retail opportunities, investors will focus on investible opportunities in new sectors including data centres, film studios, self-storage, life sciences, senior housing and alternative energy.
Although many corporates remain unsure of their longerterm office requirements, occupiers are beginning to explore growth and expansion opportunities again, which bodes well for the year ahead as workers start to return to their offices. It will likely be 2023 before leasing velocity returns to pre-pandemic levels, however.
The industrial and logistics sector was clearly the star performer of the Irish commercial property market in 2021 and looks set to be a key focus for both occupiers and investors again in 2022. High demand and record low vacancy rates will encourage developers to deliver new supply in 2022, with developers willing to take on more risk and kick-start speculative schemes. We expect to see a notable increase in speculative development of industrial and logistics accommodation.
Although viability will remain compromised outside the core Dublin market, we could see some multi-family transactions in core provincial cities in 2022.
We will continue to see competitive tension for well-located sites, particularly those with the benefit of an existing planning permission and access to supporting infrastructure. Projects offering developers an opportunity to retrofit older stock and bring buildings up to the highest ESG credentials will also be highly sought after.
In addition to the sale of individual hotel properties, we expect to see some hotel portfolio activity this year. There is already visibility on over €500 million of hotel trades that could trade in 2022.
The spate of new high-quality developments that have come on stream and at various stages of development in Cork city will create new investible opportunities and prove attractive to investors seeking prime stock that meets the highest sustainability standards and quality of design.
New and continued overseas capital flow into healthcare was a key feature in 2021 and will continue in 2022, with the Irish market standing out as a core investment geography and growth market. We expect to see considerably more development taking place in the healthcare sector than was the case previously.
With interest rates likely to increase from 2023 onwards, the next 12 months will offer a ‘window of opportunity’ for those seeking to refinance property.
CBRE’s full Outlook 2022 report is now available. To obtain a copy, contact marie.hunt@cbre.com