Economic & Market Overview

Ireland has enjoyed market leading economic growth in recent years. The Irish economy has been the fastest growing economy in Europe for five consecutive years and is expected to grow by 5.4% in 2019 and 3.7% in 2020i

  • Beyond 2020, the medium-term outlook for growth is positive and the country is expected to outperform other major eurozone economies and the USA in the oncoming years.
  • Foreign Direct Investment (FDI) has been key to the Irish economy. Large contributors to growth have been Information Communication & Technology within the services sector and Pharmaceuticals in the manufacturing sector.
  • While these sectors have been driving headline GDP growth figures, it is worth noting that the primary underlying economic indicators are also highly positive.
  • There were an additional 79,900 jobs created in 2019 and the total number of people employed in Ireland now stands at 2.4 million.
  • Unemployment has fallen from close to 15% in 2012 to 4.8% at the latest reading in January 2020 with the country now operating at close to full employment.
  • Ireland has a young population with one of the highest proportions of 25-44-year old’s in the EU. The latest population Census in 2016 showed the country had 1.4 million people aged between 25-44.
  • A return to positive net migration has been a feature in the last number of years with net migration of +33,700 people in the year ending April 2019.
  • This was the fifth consecutive year of positive net migration into the country and further supports population growth forecasts.
  • The total national population is also forecast to grow by a further 1 million people by 2040ii.
  • Investor confidence in Ireland remains robust as evidenced by 10-year bond yields continuing to trade in negative territory and near all-time lows in early 2020.

(i) CBRE Global Macroeconomics House View Forecasts, January 2020
(ii) Department of Public Expenditure and Reform, Project Ireland 2040

Macroeconomic Forecasts: CBRE House View January 2020

Office Market Dynamics

  • Dublin office take-up and demand has seen record levels in recent years.
  • The Dublin market achieved over 364,000 square meters (sq. m) of take-up in 2018 – the highest year on record for the capital’s office sector and this trend continued into 2019 with another impressive year of take-up, totalling 302,000 sq. m.
  • The Dublin 2/4 district is where much of the leasing activity is concentrated with many of the large technology, financial and professional services firms located in the area.
  • On average, take-up in Dublin 2/4 accounts for 50% of total annual Dublin office take-up.
  • Vacancy rates in Dublin are low and have settled around 4.2% in Dublin city centre. This rate falls to approximately 3.4% for Grade A stock.
  • Prime office rents have now stabilised at approximately €700 per sq. m or €65 per sq. ft which compares favourably with other European capitals.
  • Yields on prime offices in Dublin are at 4% and are trending stronger. This rate offers significant upside versus other asset classes.
  • Demand levels in the city have remained elevated despite record levels of take-up.
  • As of the beginning of 2020, CBRE Ireland track demand requirements for 432,000 sq. m of stock in Dublin. This is a record level of demand and of this total, 71% or 308,000 sq. m is focused directly on the city centre.
  • ICT (Information, Communications & Technology) companies dominate from a demand perspective, with their requirements generally of significant scale. In total, 25% of current demand emanates from ICT companies while consumer services (12.8%), financial services (9.1%) and professional services (8.9%) make up other business sectors with significant requirements at present.

Dublin 2/4 vs. Total Dublin Take-up

Dublin Office Take-Up & Vacancy

Residential Market Dynamics

  • As Dublin has enjoyed economic, employment and population growth, supply into the residential accommodation market has failed to keep pace. As such, the Dublin residential market remains fundamentally undersupplied.
  • The young demographic of the country has driven a rise in demand particularly from first-time buyers. Mortgage approvals to first-time buyers rose by 14.4% in 2019 to 25,067iii.
  • There have been general societal shifts towards urbanisation. This has seen office-based employment in Dublin grow by 14% since 2014 and is forecast to grow by a further 7% by 2025. This shift places added demands on residential housing stock in the city.
  • Consensus forecasts show there is demand for 35,000 housing units per annum in Ireland with at least 40% of those units required in the Greater Dublin Area.
  • In 2019 there were 21,241 new dwelling completions in Ireland with close to 7,000 of these in Dublin, clearly considerably below the required amount.
  • rental statistics showed an increase of 3.5% in average rental prices in Dublin in the year 2019.

(iii) Banking and Payments Federation of Ireland Mortgage Approvals, December 2019

Multifamily as a % of Irish investment spend evolution

Private Rented Sector

  • Dublin is in the midst of the institutionalisation of its Private Rented Sector (PRS) ownership structure. As such, the proportion of commercial investment spend targeted at residential investment has grown exponentially in recent years.
  • A total of €2.4bn was invested in PRS in 2019, 33% of total Irish commercial property investment spend. This is up from just over €1 billion of investment in 2018.
  • Attractive returns, stable cash flows, capital appreciation and defensive cyclical characteristics are the qualities encouraging institutional investors towards PRS, alongside the demand/supply imbalance and demographics in Dublin specifically.
  • Supply of rental stock has been a significant issue for the market and the level of apartments is significantly lower than in other European cities.
  • Dublin remains an affordable city for renting by European standards with a lower proportion of renters spending 40% of their disposable income on rent than in other markets.
  • Prime yields in the PRS sector are currently at 3.75% in Dublin and are trending stronger. rental stock and prices data