The start of a new year always brings with it an abundance of economic reports, outlooks and projections on future demand, supply, prices and trends.
This will be evident across the entire property market including the commercial market over the next number of months and with headline grabbing prices and broad averages it can often be difficult to determine the real market fundamentals as to what is actually happening.
In Jordan Auctioneers our practice is primarily based in the Leinster Region and there are obvious variations in the rental and capital values of commercial property from Kildare to say the Greater Dublin Area, where 80% of all transactions were accounted for in 2017.
However, the provincial commercial property market in Ireland has generally stabilised after a number of years of very poor performance which saw the capital values of commercial property collapse.
COMMERCIAL MARKET 2017
The overall commercial market in good provincial towns has rebounded since 2014 in line with the improving economic environment due to an increase in demand following years of very low transactional activity and the potential for attractive returns for investors available in the commercial property market as opposed to low returns available in different investment sectors (low interest rate environment on deposits etc.).
Although the banks are lending again they are still risk averse with the availability of finance still orientated towards strong locations where risk is deemed to be minimised.
In respect of the provincial industrial market the demand and transactional activity continued to stabilise/increase in provincial locations in line with the ongoing economic improvement and business environment in 2017.
With capital values still well below reinstatement cost, there continues to be strong demand for industrial property from owner occupiers with existing supply continuing to reduce in the absence of any speculative development.
The local commercial property market in Newbridge and Naas in the last 12 months has experienced an increase in transactional activity and this is due to a number of factors including attracting strong retail brands to modern retail developments like the Whitewater Shopping Centre in Newbridge and the Tesco District Centre in Naas, established office and industrial business parks of Millennium Business Park, M7 Business Park and Naas Enterprise Park (formerly Toughers Business Park) and finally strong major employers in the local area including The Kerry Group, HSE, Oral B and Pfizer Ireland.
Locations such as Athy and Monasterevin have not seen the same increase in transactional activity and these areas are still mainly dominated by local occupiers.
THE OUTLOOK 2018
Predicting values heading into 2018 is difficult but we envisage continued strong demand for good quality commercial buildings in strong locations which can provide the potential purchaser with a good return on its investment.
Confidence in the investment sector is increasing at present with investment properties in sought after locations of Newbridge and Naas that have a secure rental income and strong tenant covenant likely to command good interest in the coming year.
With current stock supply issues for the industrial and logistics sector, we expect increases in both rental and capital values to continue, making it conceivable that a return to speculative development will be viable by the end of the year in and around the M50 Motorway and down the N7 motorway towards Naas where demand is quite strong.
Outside of these areas speculative development in provincial location is unlikely to materialise to any great degree during 2018.
Values in our opinion will be specific to the property itself and therefore good advice whether buying or selling remains very important so there are no false aspirations or misconceptions as to what might be achieved.
We expect that the reduction of the Capital Gains Tax holding period from 7 to 4 years to possibly result in an increase in the volume of sales for 2018, particularly from private investors.
Investors who bought a property between the dates of 7 December 2011 and 31 December 2014 could be eligible for the relief.
Additionally, the implementation of a Site Value Tax from 2019 onwards may release land to the market in 2018.
This will be particularly welcome in the development land sector where there is a shortage of sites to satisfy end-user demand currently.
The economic outlook for the 2018 remains positive with the most recent Budget including tax cuts and a general increase in spending.
Budget 2018 also included a number of property related changes including an increase in stamp duty on commercial property transactions (incl. development land) from 2% to 6% and an increase in the proposed site tax on vacant sites, which is due to come into operation from 2019.
Given the close proximity of Budget 2018 it is difficult to gauge the impact that the stamp duty increase will have on the market but it is predicted within the industry that transactional activity with the development land sector will increase in 2018 as a result of the impending introduction of the vacant site levy.
Looking forward for the coming year we see that retail properties that come to the market in Newbridge and Naas in good locations with good footfall and substantial profile will be highly sought after by retailers.
With the volume of houses being currently built in Naas/Newbridge area to be completed in the coming years we expect that the leisure, food & beverage and beauty and cosmetic sectors could be particularly active.
Overall, we would expect transactional activity in the already popular areas of Newbridge and Naas to be strong as there is likely to be a continued shortage of product to satisfy client requirements in the Greater Dublin Area coupled with the Capital Gains Tax reduction from 7 to 4 years and the impending Vacant Site Levy from 2019 all bodes well for a busy 2018!
- Stephen TalboT, BSc (Surv) is involved in the Commercial Section of Jordan Auctioneers & Chartered Surveyors and has been involved in all aspects of commercial property for the last 5 years and works directly with Paddy Jordan. He can be contacted on 045 – 433550 or email@example.com