Temporary cooling in Cork market in first quarter of 2019

Lisney’s Aoife Brennan

A review of the performance of the Cork commercial property market for the first quarter of 2019 by Lisney gives support to sentiment of a temporary cooling down in activity levels.

Whether that’s down to down to Brexit and wider economic concerns, remains to be seen in coming quarters, but it chimes with local perceptions of a slowdown in pipeline performance, and properties lined up for sale and for investment.

Quarter 1 2019 turnover is “substantially lower than the same period last year,” according to stats from Lisney’s Aoife Brennan, noting the contrast with “a very strong year in the Cork investment market in 2018 , when about €270m worth of deals concluded, there was a quiet start to 2019”.

While deals worth €36m are at advanced “sale agreed” stages, and big ticket items like the Wilton Shopping Centre (€86m) remain on offer, in fact, just four investment deals concluded in Q1 at a combined price of almost €10.95m, the largest being an office building in Cork Airport Business Park, bought by Yew Grove REIT for €7.5m at a net initial yield of 7.8%.

Prime investment yields remained stable in Cork in Q1, it’s reported, with 6% on offices, 6% on retail, 8% on industrial and 5.25% (gross) on PRS residential investments.

Cork’s industrial activity, on a 12-month rolling basis, saw take-up “running at its strongest annual rate since 2014, at almost 38,500 sq m. While this is positive, it is heavily influenced by several large deals, particularly sales,” says Ms Brennan, adding that while construction remains at relatively low levels “it should be noted that rents are now just at levels that justify development.”

On the offices front, and while the construction sectors sees up to one million sq ft being delivered, Q1 office deals dipped from the levels of Q4 2018 to a “subdued” take-up total of just 2,100sq m, across just two transactions, at 85 South Mall to Forcepoint, and at North Point House, Blackpool.

“Compared to the previous three quarters, this level of take-up is low,” says Ms Brennan, however adding Q1 levels for a year ago, 2018, were also low, at just 1,500sq m across five deals.

Prime headline city centre rents remained stable in Q1, for the third consecutive quarter at €344 psm (€32 psf), but are up by 6.5% over a full year, while suburban headline rents were stable in Q1 at €215 psm (€20 psf). Overall vacancy declined, to 11.8%, compared to 12.25 in December 2018, and from 14% at the end of Q1 2018.

Despite having the greatest concentration of new office construction and recently completed developments, some of the largest falls in available office space in the last year were in the city centre area and on South Mall especially,” the Lisney report notes.

“Looking to the remainder of 2019, we expect take-up to continue to eat into supply and in turn the vacancy rate falling further. We also expect the pace of rental growth to slow with rents somewhat stabilising as new schemes come to the market. Rental levels are expected to remain very competitive compared to Dublin, making the Cork attractive to FDI companies.”

Details: Lisney, 021-4275079

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