Opportunity knocks as Cork commercial property market tops investor choice outside of Dublin
Cork is at the top of the list of locations that investors are open to investing in outside of Dublin, according to research by commercial real estate firm, CBRE
CORK is “at the top of the list of locations” that international investors are open to investing in outside of Dublin, according to new research by commercial real estate firm CBRE.
The report, entitled “A Case for Cork” acknowledges the role played by foreign direct investment (FDI) in Cork’s success, with several multinationals expanding their businesses in 2023, such as US pharma/biotech giant Thermo Fisher which doubled its capacity in the city and F&B giant PepsiCo who announced a €39m investment in its Cork plant, where it employs over 1,000.
Other wins for the city included the announcement by US multinational Qualcomm that is investing €116m into it's Cork R&D facility while US semiconductor group AMD is investing €135m across Dublin and Cork.
International investors were involved in some notable retail transactions such as the sale of Douglas Village Shopping Centre for almost €23m to a syndicate of private investors, led by Cork businessman Tom Coughlan, on behalf of Urban Green Private.
Nearby, Douglas Court Shopping Centre sold also during 2023, but to a private local buyer, the O’Leary family, led by Anthony O’Leary, formerly of O’Leary Insurances, who paid €21.5m, while the largest investor sale of 2023 was of 1 Westfield, a community care facility in Ballincollig, for c €31m to UK-based Primary Health Properties (PHP) plc.
According to Denis O’Donoghue from CBRE’s Cork office, “Cork remains an attractive location for developers and investors”. Emer Geissel, analyst on the research & consultancy team at CBRE Ireland, said the city’s real estate market “benefits from a fast-growing population, strong economic growth and substantial levels of FDI”.
In terms of office stock, the report cautions that while the city market benefits from FDI, “it has a limited supply of sustainable stock”. Moreover, office take-up last year (28,600 sq m across 42 transactions) was “slightly lower than the long-term annual average of 30,000 sq m”, the report says. The office vacancy rate at the end of 2023 was 15.5% in the city centre. And while prime office yields are up 125 basis points since the end of the first half of 2022, office valuations have been impacted by interest rate movements, more challenging occupational markets (hybrid working/remote working) and investor sentiment, the research says. There are some new developments in the pipeline, including Horgan's Quay 2, where a second office block in the north docklands is almost completed.
As of 2023, the top office leasing transactions in the city and suburbs included the HSE’s leasing of 6,000 sq m at Westfield Office Quarter in Ballincollig.
The report also highlights the vibrancy of the hotel market thanks largely to the popularity of the southern region among tourists, both domestic and overseas. Confidence in this segment of the market is captured in the sale for a reported €25m of the 4-star Imperial Hotel on South Mall to the Louis Fitzgerald group during 2023 and the recent opening of the UK-based Whitbread group’s first Premier Inn (187-bed) outside of Dublin, on Morrison’s Quay, with plans for a second (168-bed) at the site of the former Coliseum cinema/Leisureplex on the junction of MacCurtain Street and Brian Boru Street.
Others in the pipeline include a 148-bed Moxy Hotel and a 43-bed Residence Inn by Marriott, both on Camden Quay (by Uk-based Kajani/JMK Group), due for completion this year.
Student accommodation remains inadequate in the city despite some high-profile deliveries in the past year or so (Ashling House on Bandon Road, Lee Point on South Main Street, UCC’s Crow’s Nest at Victoria Cross and Bróga House on Washington Street).
However, with a student population of 38,000, of which almost 50% are not from Cork, the current student-to-bed space ratio is 5:1. Another 620 beds are in the pipeline, via Bottleworks, at the former Coca-Cola site on Carrigrohane Road, due for student intake in September. It will be one of the largest student accommodation developments in the country.
Plans were also recently granted for a 200-bed development in Bishopstown.
Yields for prime provincial student accommodation stood at 6.25% at the end of 2023 - an increase of 75 bps from H1 2022. There is a 100bps spread between provincial and Dublin student accommodation yield.
Industrial and logistics is another area of undersupply, exacerbated by the growth of e-commerce, the report says.
“The vacancy rate for industrial properties in Cork has more than halved since 2022, currently standing at a record low of just 0.7%,” it adds. Blarney Business Park, developed by the JCD group, is singled out for its success in attracting tier 1 occupiers including FedEx and DHL. “The success of the park has led JCD to secure planning permission for another modern park, Evergreen at Little Island,” the report says.
The largest I&L leasing deal of the year was at unit 4 in Anchor Business Park in Little Island, where Swiss freight specialists Kuehne+Nagel, signed a long-term lease for 6,900 sq m.
There’s mention in the research too of a rebound in development land sales activity, after a sharp decline in 2022. The largest transaction in Cork in 2023, and one of the top land sales in Ireland in 2023, was for 73 acres of residential zoned land in Maglin, Ballincollig. Vendors in the €15m sale were a local business/farming family and the buyers included developers/builders Murnane & O’Shea.
Another noteworthy transaction comprised 22 acres in Ardrostig, Bishopstown, which was sold to Bridgewater Homes for €10.4m. The site has planning permission for 276 residential units.
“At present, approximately €83m worth of sites are being offered both on and off-market or are in the deal-agreed phase, subject to planning permission,” the report says.
The residential housing market gets a mention too where, like Dublin, demand significantly exceeds supply. The report notes that there are 105 sites with planning permission for 9,037 units (including 1,300 residential units on the south docklands, under plans by Leeside Quays Ltd/O'Callaghan Properties), while a further 5,000 units are at various stages of the planning process. The report adds that momentum for social and affordable housing is likely to continue as the Land Development Agency and Approved Housing Bodies “are expected to sponsor some large-scale apartment developments” at a time when developers are struggling to finance the job themselves because of inflationary challenges, heightened by geopolitical events and weakened investor sentiment.
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