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Commercial Property

Rents on rise in industrial sector but falling for retail

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On the up: Retail rents on Dublin’s Grafton Street showed strong growth
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On the up: Retail rents on Dublin’s Grafton Street showed strong growth

The pressure and challenges facing the retail property market and particularly falling rents is reflected in the Commercial Property Review and Outlook 2020 published today by the Society of Chartered Surveyors Ireland.

It shows that prime retail rents fell 9pc in Dublin and 7pc in the rest of the country in 2019, although Grafton Street rents rose 7pc.

The industrial sector was the star performer in the commercial market while offices are seeing stabilisation in rents, according to the report which is based on a survey of its members.

"It's clear from the report that all retail operations, whether in urban city centres or smaller rural towns are continuing to grapple with the challenges posed by online and the transition to a more 'experiential shopping model'," the report says.

"Smaller towns are facing particular challenges. Several surveyors noted that these towns are often bypassed as people head to the cities to do a bigger shop. Some of them are trying to support a high street and an out of town shopping centre but it's very difficult to maintain activity in both," says SCSI president Johanna Gill.

"Despite the growing economy and improved consumer sentiment there has been a continued reduction in the demand for retail space from tenants. As we've seen it's actually the logistic and industrial property sectors which are benefiting from the upturn via online shopping and delivery.

"One positive trend our members are seeing is online stores developing pop-up shops to showcase the products they are selling on their websites. This is very welcome and worth monitoring."

Rents in the prime industrial sector soared 29pc during 2019 in Dublin driven by the demand for high spec new units from logistic, tech and data firms.

Nationally, members forecast that prime industrial rents will grow by 4pc this year due to the undersupply of suitably sized stock.

More than half, or 56pc, of the 400 respondents believe that supply of prime industrial high specification units with more than 500 sq m will not meet the demand of firms seeking to grow and expand their operations. In Munster, 100pc of respondents believe demand will outstrip supply.

Members expect that Dublin's office market may plateau this year with modest rent increases of just 1pc to 2pc. This reflected a broader national picture of increased office supply, steady if unspectacular take-up and an expectation that rents will remain largely unchanged through 2020.

That said, the report found that last year prime third generation office rents in Dublin increased to €675 per sq m, an 11pc increase year on year, while in Cork the corresponding figure was €250 per sq m, a 12pc increase.

Half of respondents expect Dublin supply to increase.

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