As 2020 commences, both global growth and the pace of employment growth is slowing. However, CBRE’s house view is that there is no recession in sight.
Returns are likely to stabilise further over the course of 2020, but real estate remains highly desired by investors and Ireland’s stable economic backdrop and healthy occupational story bode well for another strong year ahead in the real estate sector.
The borrower outlook for 2020 remains extremely positive with the level of competition in the market continuing to deliver extremely attractive lending margins. However, covenant packages will continue to be lender friendly, with lenders remaining prudent in their underwriting and focused on keeping loan-to-value (LTV) rates at modest levels compared to those prevailing before the global financial crisis.
Considering the yield differential between Ireland and other European countries and the underlying economic & occupier market fundamentals that Ireland offers, we expect to see continued appetite from both Irish and European institutional funds for Irish real estate investment opportunities during 2020. We also expect to see increased appetite from Asian investors this year with an increase in Singaporean and Hong Kong investors anticipated.
For a sector that was deemed alternative only a few years ago, multifamily is now increasingly considered mainstream, with many investors encouraged by the attractive return profile from a sector that is generally less susceptible to cyclical movements over the medium to long term - a trait that is particularly attractive at this point in the property cycle. We expect to see more Irish investors looking to deploy into this sector alongside a greater array of European funds and some Asian capital also.
Demand for office accommodation remains elevated and we are expecting another strong year in 2020 including some carryover of transactions from last year. We are likely to see some new schemes lodging for planning this year and we may also see some existing schemes going back into the planning process in an attempt to obtain additional height during 2020.
CBRE’s annual Ireland Market Outlook report takes a comprehensive look at the prospects for real estate in the year ahead.
We cover the economic backdrop, the investment outlook, and we examine the prospects for each of the main real estate sectors.
Despite continued uncertainty around Brexit and the geo-political noise that dominated the news agenda during the last 12 months, the Irish economy performed well and 2019 proved to be another strong year for the Irish commercial property market, both from an occupier and investor viewpoint with record investment volumes recorded during the year and real estates’ attractiveness to investors increasing as a result of easing monetary policy.