Irish CRE sector will polarise further in 2013: CBRE

CBRE is bullish about prospects for Ireland's prime property market in 2013 but is more sanguine about the deleveraging of secondary and provincial properties.

In its new Outlook 2013 report, CBRE predicts properties will continue to come to the market on a relatively controlled basis in the course of 2013 with the deleveraging process continuing but at a continued slow pace.

The adviser foresees more loan sales activity in 2013 as banks continue to unwind their property holdings, and the market could also see the disposal of some of the underlying securities that were sold by way of loan sales during 2012. In particular, more hotel properties are expected to be being brought to the market while some of the NAMA banks will also start to offload hotel properties.

'A busy year is in prospect in the Irish commercial property sector in 2013 as the wreckage is cleared away and we move into a recovery phase for the economy and in turn for the property market,' said Marie Hunt, executive director and head of Research at CBRE. 'However, the prospects for prime property are considerably better than secondary with increased polarisation likely to be a key trend in 2013.'

International investors will continue to focus their attention on prime office, retail and residential portfolio opportunities, primarily in core locations in Dublin while domestic investors will be the most dominant purchasers of secondary and provincial investments, some of which are likely to continue to experience further outward yield shift over the course of 2013 considering the likely depth of cash buyers.

In contrast, the weight of money chasing prime investment opportunities in the Irish market has the potential to generate some further yield compression in the office and retail sectors during 2013 despite the fact that short-term rental growth projections remain relatively flat.

The broker also sees potential for some limited rental growth to emerge at the prime end of the office and retail sectors in 2013 although for the most part, rents are likely to remain relatively stable in the next 12 months. The level of incentives such as rent-free periods for prime buildings could move in a little as the year progresses.

An increase in the number of refurbishment projects is expected this year but no new speculative office development is forecast to commence in 2013 on the basis that rental and capital values are not yet at a level which would render development viable. 'We are getting closer to this position in prime locations in Dublin 2/4 but speculative development is not on the horizon for secondary and provincial office locations at this point,' CBRE said.