Construction BUSINESS

The latest Origin Capital Commercial Real Estate Sentiment Tracker has shown that commercial real estate (CRE) professionals expect to see huge flux in the market in Ireland in the coming months.

The tracker, completed by 250 industry professionals, found that, alongside a predicted increase in the level of CRE activity, CRE specialists expect changes in transaction prices and rent levels and increased numbers of new market entrants to be features of the Irish market in the coming months.

The results from the survey showed that over the next three months:

• 67% expect CRE rents to increase (30% predict no change; 3% expect a decline)
• 52% expect the number of CRE transactions to increase (30% predict no change; 18% predict a decline)
• 61% expect the price of CRE to increase (33% predict no change; 6% expect a decline) – this is up from the previous Origin Capital CRE Sentiment Tracker (48% in Nov 2016)
• 73% think it is likely that new players will enter the market (12% believe it neither likely nor unlikely, 15% think it unlikely)

Commenting on the findings, Ross Metcalfe, CEO of Origin Capital, stated: “It is positive that over half of the respondents believe that the number of CRE transactions will increase in the coming three months. These CRE specialists also expect to see transaction prices and rental prices increase over the same time period. This level of flux and change in the CRE market is considerable and Origin Capital is working with a variety of borrowers to provide financing to meet their lending requirements.”

“Unsurprisingly, Brexit very much continues to dominate the minds of CRE industry professionals, and it is interesting to gauge their opinions regarding both the Government’s efforts to prepare Ireland for Brexit, and also how successful Ireland will be in attracting companies relocating from the UK,” Ross Metcalfe continued.

Key Brexit findings:

• 73% of respondents believe that Ireland will only be successful in attracting “a small number” of companies who are relocating from the UK as a result of Brexit (23% expect Ireland will attract a significant number of companies, while 4% believe that Ireland won’t attract any of these companies).
• 68% of respondents do not believe that the Government is doing enough to prepare Ireland for Brexit (32% believe the Government is doing enough).
• Brexit was once again by far the most frequent factor identified by respondents in relation to specific risks to the sector over the coming three months.

Findings – Concerns about CRE in Ireland:

A number of factors continue to cause concern to CRE specialists, including the impact of building height restrictions, the lack of infrastructural investment and a perceived lack of Government preparation for Brexit. Other commonly cited risks include the housing crisis and co-related lack of supply and the difficulty in sourcing funding for CRE transactions.

51% of respondents believe that potential policy changes by President Trump’s administration will have a negative impact on the CRE industry (6% predict a positive impact while 43% predict no impact from policy changes).

Once again, the vast majority of respondents (80%) do not believe that the level of funding being provided by traditional banking institutions in the CRE sector is sufficient to meet the needs of the market (20% believe it is sufficient). 86% of respondents believe that planning restrictions on commercial and residential building heights are having a negative impact on the CRE industry and 80% of respondents do not believe the current level of infrastructural investment in Ireland is sufficient to support the growth of the CRE industry.

“It is clear that respondents have concerns about the future growth of the CRE industry based on the ongoing restrictions on commercial and residential building heights and the lack of infrastructural investment,” Ross Metcalfe concluded.

Origin Capital provides senior debt commercial property finance in the Irish market for investment deals in excess of €3m, with no upper limit on transaction sizes. Origin Capital recently announced a funding agreement with Morgan Stanley which will allow the company to provide funding for CRE projects across a wide variety of asset classes, and also to compete for significantly larger transactions.