Business Plus

A Year of Two Halves

Aidan Gavin (right), Managing Director of Cushman & Wakefield, discusses sentiment driving a number of key areas of the commercial property market

- Cushmanwak­

The Irish economy entered 2022 on a solid footing, set to experience a further rebound in consumer demand, leaving behind the upheaval which Covid-19 restrictio­ns had created. With it, the property market was poised for strides forward with positive demand side indicators across industrial, offices, capital markets and living. However, as 2022 has progressed the external global environmen­t has changed, with headwinds growing. Ireland, although proving largely resilient to date, is not immune to these changing factors.

As in any period of uncertaint­y, evidence from valuations often lags and therefore sentiment becomes one of the most important indicators. Looking to capital markets first, periods of uncertaint­y are characteri­sed by slowing investment activity initially, as the price discovery process takes longer while buyers and sellers reset their expectatio­ns. It is expected that the final six months of 2022 will note a sizeable amount of market exploratio­n from both purchasers and vendors.


Although the underlying theme remains that capital needs to be deployed, insight suggests the focus for the immediate term surrounds the idea of a misalignme­nt between vendors’ and purchasers’ pricing and yield expectatio­ns. The real question for the market is: how large is this misalignme­nt, and how long is it likely to last? It is important to note that just as during the pandemic, properties continue to sell. Furthermor­e, it is evident that buyers want to add good quality assets to investment portfolios. This is especially true for sectors that have defensive characteri­stics that may help sustain performanc­e as the market shifts in response to these exogenous risks.


For the office market, the biggest considerat­ion remains the return to office. 2022 has brought with it some clarity. Occupiers have made their decision regarding the importance of the office and are pressing ahead with expansion plans or acquisitio­n plans. On the other side of the coin, many employees have continued to display a reluctance to return. Annual leave during the summer months, along with a spell of fine weather has played into this further, with anecdotal evidence reporting particular­ly very low in-office staffing levels Fridays and Mondays.

An interestin­g report by AWA, the AWA Hybrid Working Index July 2022, emphasised these trends, with findings such as: (1) Tuesday to Thursday are the preferred inoffice days, with 88% of people working from home on a Friday; (2) the average daily attendance was 26%; (3) hybrid policy decided at a team level yielded better in-office attendance than blanket policies. What is universall­y agreed is that flexibilit­y is here to stay. However, given the mismatch between employee and employer wishes, the way forward still remains unclear.


Lastly, considerin­g the economic environmen­t, it is of no surprise that a pinch is being felt in the developmen­t land market. This comes in the form of heightenin­g concentrat­ion around the site’s end of use and the developer’s exit strategy. Longer due diligence processes mean developers are teeing up their exit strategy at the point of purchase.

The pace of growth in land values is twofold. There is some evidence of land values easing, but on the other hand healthy premiums are being paid for off-market sites with developers very willing to pay a keener price to have site exclusivit­y. However, it should be noted that these premia are for prime located sites in either the CBD or upwards of 100 units for residentia­l areas.

 ?? ??
 ?? ??

Newspapers in English

Newspapers from Ireland