“These will be vigorously contested by both landlords and retailers, who will have differing opinions on how the market has evolved in the last five years,” notes the imminent Lisney Review of 2015 and its preview of 2016 trends.
Retail changes are expected at the former Capitol cinema site, Merchants Quay, and the more-than doubling of Penneys’ presence on Patrick Street, as well as possible redevelopment at the Savoy/Quills, and the Victoria Hotel for a retail-led mixed use scheme.
Lisney predict continued investor demand for retail, office and multi-family investments given that demand exceeds supply, and the prospects for strong rental growth also, which has seen international interest spead to cities outside of Dublin in 2015.
Yields are expected to continue to contract, and rents to increase, while prime yields for asset classes ended 2015 at 6.75%-7.75% for offices, 6-7% for retail and 6.50% - 8.00% for multi-family units; capital values of residential units “remained below the cost of replacement in many instances and this has made the sector very attractive,” notes the report.
On offices, the deal of 2015 was the investment sale to Green REIT of One Albert Quay (pictured right, with the Elysian) for €55m-plus, where rents are understood to be in the region of €270 per square metre.
The JCD building’s final sale price could be closer to €58m depending on final letting levels at handover.
Tenants include PwC, Tyco, Investec and Arup, and Malwarebytes who currently are accomodated at 5 Lapps Quay may also join the line-up at One Albert Quay.
For further office invesments, at locations such as Andersons Quay and South Terrace/Copley Street, significant pre-lets will be required and at rents of up to €280-300 psm, according to Lisney.
The sale of the Clarion Hotel at Lapps Quay to Dalata Hotel Group for €35m is evidence of confidence in the city centre; other investment assets purchased in loan sales may characterise major offers in 2016, it is suggested.
Meanwhile, the formal arrival for sale of the Port of Cork site at Custom House this month will centre further interest in this rapidly evolving new Central Business District.
The Port of Cork site, including Bonded Warehouses, and a development plot at the very end of this site between two river channels, may suit office, hotel or apartment developers.
The arrival of One Albert Quay “has changed the quayside landscape over the past 12 months and once complete, will bring new life to the City Quarter/docklands area,” say Lisney, who note that total office take-up in 2015 was 20,300 sqm, marginally less than in 2014.
International companies remained active with Opentext, Bluepoint, Arup, Centrica, Regus, Malwarebytes and Asytec all taking space.
Excluding City Quarter, a continuing issue is the shortage of large, single floor plates.
Older buildings acquired by investors in 2015 will need modernisation to secure tenants and 2015 ended with a vacancy rate of 19.4% or approximately 95,000 sqm of office accommodation available across Cork city and suburbs.
In the city centre, the vacancy rate was 27%, or about 40,000 sqm was available: “while this is a large level of supply, only a limited amount is of modern quality,” say Lisney.
Other office development sites in the pipeline include JCD’s Central Plaza in Mahon with up to 32,500 sq m available, a 6,000 sq m building at Eastgate, plus an office element at the Capitol cinema site.
Office demand can also be met in a Phase 2 Cork Airport Business Park and in Ballincollig.