VALUE TO BE HAD IN ALL SECTORS OF THE MARKET
25 November 2009
A summary of some of the sectors includes:
Investments:
In the investments market demand is increasing but turnover is constrained by the lack of quality assets on offer. Market turnover in the first nine months of 2009 was only c. e100million, down significantly from c.e 3.5 billion achieved in 2006. “A number of off market deals are under negotiation and turnover has the potential to double by the end of the year” says Michael Clarke, Associate, Savills. Domestic private investors are constrained by the lack of liquidity in the banking system and as a result there are very few investors with the ability to invest in lot sizes over e5 million. There is significant interest from international investors with German Funds and institutional and private investors from the UK, Europe and the Middle East submitting offers in recent months. However few transactions have taken place due to the limited supply of suitable product.
Offices
There has been a slight improvement in tenant demand but take-up this year is unlikely to be higher than 70,000 sq.m. which is less than half of the take-up in 2008. The vacancy rate has continued to rise in all locations as new buildings are completed and second hand space is offered to the market, it is expected to peak towards the end of 2009 or early 2010. “There is now exceptional value in the market and it is unlikely that rents will fall further” says Roland O’Connell, Director, Savills.
Industrial
Take-up of industrial space in the Dublin area is likely to reach 100,000 sq.m. by the end of 2009, compared to 147,000 sq.m. in 2008. “Although take-up is down approx 33% on last year it is evidence that there is continued demand for industrial space, albeit at lower levels than witnessed in previous years” says Savills Director, Gavin Butler. The amount of available space is expected to exceed 1,000,000 sq.m. for the first time this decade. “With funding from NAMA likely to filter through to the banks by Q2 2010, the increase of funds is likely to increase the number of sales transactions in 2010. We therefore predict the take-up of industrial space to be in the region of 100,000-150,000 sq.m. in 2010” adds Gavin Butler.
New Homes
While 2009 has been another bad year in the new homes market, Savills will sell four times as many new homes as in 2008. “My belief is that prices have hit the floor and I am convinced that those buying now are enjoying the best possible value and choice” says Ronan O’Driscoll, Director, Savills. Following the challenges of the Lisbon Treaty, NAMA legislation and the December budget, early 2010 will mark a new phase. “By early 2010 it is my contention that most of the bitter pills will have been swallowed and the market will finally begin again in earnest and it is not inconceivable that house prices in some sectors may increase next year.” added Mr. O’Driscoll.
Development
There has been a continued decline in offers received for development property in the second half of 2009 and no significant transactions have taken place. “It will take the market at least five years to absorb the existing stock of apartments in Dublin and certain areas are clearly over-supplied including Tallaght, Sandyford and the northern fringe. It may take longer to deal with the oversupply of built and partly built housing estates in provincial towns” says Donal Kellegher, Director, Savills. In 2010 there will be opportunities to buy small infill sites at market value suitable for 10-50 houses in established areas in Dublin. The availability of serviced sites will increase and most transactions will be small and conditional on planning, by joint venture with landowners or under building licence.
Residential
The Savills residential property index shows that prices in most of the Dublin suburbs are at levels transacted in 2004. In most cases this represents a 40-50% downward price adjustment. There are some suburbs where the price correction has been less severe (Howth, Clontarf, Raheny) but the index shows that prices in these areas are back to those transacted in 2004. “The gap between asking prices and prices being paid has narrowed and we expect this trend to continue in 2010” says Joan Henry, Head of Research.
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For further information please contact:
Ger Hennessy, Savills, t: +353 (0) 1-6181345 / 087 2872249
