Cork commercial market takes a breather

By Diarmaid Condon

Lisney has just released a Q1 review of the office and industrial markets for Cork city and surrounds and accordign to the agent, last year was a very strong year for the commercial property market in general.

Now, it appears, it will be taking a breather as it reports that office sector activity in particular, has been quite subdued. Available accommodation continues to decrease with demand for top quality new-build office space rising, which has encouraged construction activity.

Overall office vacancy decreased 0.8% to 14.0%, with large regional variations. The city centre has 19.6% vacancy with the north suburbs at 9.3%, a reflection of the level of older, and thus less attractive, stock in the centre.

Office deals in Q1 were all lettings under 500 sq m, apart from the 650 sq m. Xilinx expansion in Eastgate Business Park. The east suburbs accounted for almost 80% of activity but it notes that Clearstream Global

Securities has agreed a 6,500 sq m pre-let, in the nascent Navigation Square development. ‘Eighty5’ South Mall, also currently under construction, is expected to announce pre-lets shortly.

Headline city centre office rents remain unchanged at €323 psm (€30 psf) as do suburban rents at €215 psm (€20 psf). Prime rents on South Mall increased by 6.8% to €172 psm (€16 psf) with rents on Lapp’s Quay moving forward 10.2% to €237 psm (€22 psf). There is currently 41,900 sq m of new office space under construction including a 15,000 sq m extension to Apple’s facility at Hollyhill and 4,650 sq m at ‘Eighty5’ South Mall.

In the city centre the 13,800 sq m first phase of Navigation Square at Albert Quay is due to complete later this year. Other activity continues at Eastgate Business Park and Cork Airport Business Park. Planning has been granted for a further 157,000 sq m across 10 locations.

Overall Lisney says office vacancy rates are likely to continue to fall during the year with new office developments currently under construction being pre-let prior to completion. Upward pressure on rents, particularly in suburban business park locations, is likely due to limited stock and increasing demand.

The industrial sector has been more steady in Q1 with take-up levels decreasing slightly and an increased appetite for smaller deals. Supply is limited, with building costs still greater than capital values, so there are no speculative developments under construction yet.

Only seven deals, all rentals averaging 450 sq m, were transacted in the period. Prime industrial rents are at €70 psm (€6.50 psf) excluding the northern suburbs, where rents of €54 psm (€5 psf) prevail. Capital values excluding northern suburbs increased by 7.6% to €753 psm (€70 psf) with northern suburbs remaining unchanged at €538 psm (€50 psf).

Supply levels increased by 0.3%, leaving the vacancy rate unchanged with supply 10.5% lower than a year prior at 189,300 sq m. Over 72% of the available space is located in the south and east suburbs. Availability is predominantly older stock with low headroom by modern standards and no dock level loading.

Speculative development is non-existent, but some is planned including EZ Living’s 6,000 sq m warehouse in Little Island. A 31,000 sq m data centre on the former Mitsui Denman site in Little Island has also been granted permission with the same developer seeking pre-lets on a 4,700 sq m logistics building in Blarney Business Park. Remarkably, this is the first speculative industrial construction around Cork since 2008.

Going forward Lisney expects increased investor interest in modern warehouse units, greater than 1,500 sq m in size, with dock levellers, resulting in renewed development over the coming year.