Data bank will monitor Cork property market for first time

AS IRELAND’S property investment market returned to new highs with 40% overall Y-O-Y returns for the final quarter of 2014, Cork city’s property investment market has also been tracked and benchmarked internationally for the first time ever.

The inclusion of research on performance on the Cork market has been welcomed as a boon to the region by the likes of developer Michael O’Flynn, and by national/international estate agency firms with a Cork presence.

The first authoritative IPD/MSCI research for Cork shows the second city showing ecovery signs at a slight lag to the resurgent Dublin market. The just-released Q4 2014 IPD figures show returns on Irish offices and retail running at twice that of the UK (19.3%), largely driven by increases in office rents.

Irish real estate also outperformed Irish bonds, up 23.1% in the past 12 months, and above equities, returning 16.9%.

MSCI researcher Colm Lauder observed “commercial property in Cork has partially recovered after the great crash, but it’s all relative: Capital values are down almost 74% since the market peaked in the last quarter of 2007, while rents have more than halved.2

“This high level of discounting has provided a competitive edge to Cork assets, particularly with an income return in excess of 10% a year.” And, he added that “knock-down rents” were clearly starting to tempt new tenants into the city’s retail market, while headline rents returned to growth in Cork in Q3 as “a tentative sign of improvements in the retail trade and growing confidence amongst office occupiers.”

Irish developer Michael O’Flynn said the research “highlights the strong returns being achieved by investment in Irish commercial property and Cork’s strong contribution to that overall performance. Cork city is experiencing a period of growth in terms of both rental and capital values which is extremely positive — and, necessary - to create replacement stock.

“These improved market indicators are reflective of the fundamental strengths that Cork, as Ireland’s second city, offers as an investment opportunity,” Mr O’Flynn added.

“The focus in the media is often specific to the Dublin market where there has been impressive growth, in particular for the office sector, over the last 12 months. Whilst acknowledging that the recovery in commercial property returns has been Dublin-led, this research shows that investors are increasingly interested in looking at other strong growth centres outside Dublin which show the same investment characteristics.

“I believe Cork’s infrastructure, business community and strong local economy will continue to attract investor’s attention in the year ahead which is critical to Cork’s further development and its ability to attract FDI,” said Michael O’Flynn.

Lisney director Margaret Kelleher welcome the international research interest in Cork and noted “after Dublin, Cork was the next busiest locational area of the Irish investment market and accounted for 4.3% of the €4.4 billion worth of deals done in Ireland in 2014.”

Office assets were most in demand with prime yields now down by 100 basis points since mid 2012. In terms of retail investments, prime yields also continued to harden with rates falling from 8% to 7.2% over the year and Zone A rentals in the most prime area of Patrick Street were now close to the €200 psf Zone A level.

“Increased rental growth and occupier demand has stimulated existing and planned development and redevelopment activity in the city centre office and retail sectors including One Albert Quay, Merchants Quay Shopping Centre and the former Capitol Cinema Site with further announcements expected imminently on Grade A office developments,” she said.

Details: www.ipd.com www.msci.com