Hotels in Cork city are now being challenged by the growth in purpose-built student accommodation, with a dramatic surge in summer letting offers of apartments to tourists, when colleges are traditionally wound down.
The impact of the seasonal availability of hundreds of student beds is identified in a report out today by international property agents CBRE, in their Outlook 2020 report, which noted a dip in Cork city's hotel perfomance during 2019.
It comes too at a time of a strong increase in supply both of new hotel beds, with 1,250 hotel rooms either approved for planning permisisson or under construction. Meanwhile, construction is also underway on 1,200 student beds in a number of sizeable cork city developments, with another 1,500 student beds in the pipeline or already through the planning process.
According to CBRE executive director and Head of Research Marie Hunt, “the hotel market in Cork is becoming more competitive with additional new supply due to come on stream this year, including The Dean.”
Cork's hotel sector “experienced a slight deterioration in trading performance in 2019,” Ms Hunt asserts, but contextualises it by identifying several impacting factors, and adds that “this is in the context of a record performance the previous year.”
"There are approximately 1,250 new hotel rooms in planning in Cork at present albeit not all of these will come on stream in the short to medium term,” she predicts, identifying active ones such as The Dean and The Windsor by MacCurtain Street and Kent Rail Station, as well as one planned for Morrisons Island, to be run by Premier Inns.
“Both occupancy and RevPAR have also been affected by Summer rentals of purpose-built student accommodation which has come on stream in the city in recent years,” Ms Hunt asserts.
On the broader property, business and construction sector in Cork, CBRE's Outlook 2020 identifies continuing demand and delivery of new offices, with a pick-up in occupier deals in the latter half of 2019, while city centre retail demand is being driven mostly by the food and beverage (F&B) trades.
Notably down in activity level in the Greater Cork region in 2019 was the development land market, down a marked 50% in the total value of land transactions on the previous busy year, 2018.
Describing 2019 activity levels in land deals as “muted,” CBRE's Ms Hunt also explains that “many of Cork’s existing developers have sufficient land banks for the foreseeable future and are not buying additional sites until such time as they need them.”
The cost of funds for developers, under traditional debt models, “continues to prove prohibitive and with build cost inflation running well ahead of house price inflation, developers are reluctant to forward buy too much land in the current climate,” she adds.
Apart from purpose-built student accommodation, “apartment development for the most part remains unviable and we are unlikely to see any meaningful delivery of much needed city centre residential units in the short- to medium-term, with any potential development confined to a very limited number of the most prime sites,” according to the CBRE director.
CBRE say they are confident of “a healthy volume of both occupier and investment activity in the Cork market in 2020, buoyed by the delivery of new stock in many sectors. We are however urging Government to prioritise the delivery of infrastructure, and in particular apartments, to enable the city and region to truly compete and reach its full potential.”