Inside this Issue: Housing commencements reached just over 8,000 in 2015, but up from a low base +19%

Transcription

1 Property Watch Q4 15 From Property Industry Ireland, the most influential property organisation in Ireland Inside this Issue: Housing commencements reached just over 8,000 in 2015, but up from a low base +19% Highest level of take-up in Dublin office market since 2007 c.250,000m 2 Another record year for property investment 3.5bn AIB is supporting new homes development AIB, through the Land & Development team in the Property Lending Unit and through their network of New Business Centres, is currently supporting the development of in excess of 1,400 residential units. Special Report IDA Ireland on the property industry s role in securing Foreign Direct Investment (FDI).

2 Introduction No matter which parties form the next government, property should be top of their agenda Mario Cuomo, the Democratic governor of New York in the 1980s and 1990s famously said that the politician campaigns in poetry and governs in prose. This second edition of Property Watch is published at a moment in Irish political life when the poetry of the manifesto is being negotiated into the hard text of a programme for government. The tone and content of that programme for government if a consensus between the parties to govern can be made will shape the economy and the property sector which it serves for the next five years. If the incoming government needs some guidance where it should focus its attention on building sustainable economic growth, a look at the data in this report would be a great starting point. There is no doubt that activity is increasing in the Irish property sector. Whether the measure is residential sales, commercial property investment or housebuilding, the indicators look more positive than they have done in the past. Nonetheless, there is much still to be done if the Irish property sector is to play its part in delivering real economic growth, attracting further investment into Ireland and ensuring an increased supply of high quality, affordable housing. This report is part of PII s commitment to provide the industry and wider community with evidence-based research underpinned by the highest standards of transparency to help everyone make better, more informed decisions. As always, feedback is important, so please do let me know if you have ideas for improvements for future editions. Dr Peter Stafford Director, Property Industry Ireland 2

3 Property Overview The recovery in the commercial property market gathered momentum in 2015 There was strong activity in the Dublin office market in 2015 as take-up reached its highest level since As a result, rents in Dublin came under pressure, with all agents reporting double-digit growth in prime rents over the year. Similarly take-up in the Dublin industrial market reached its highest level since 2006, spurred on by strong demand from multinationals and pharmaceuticals, as well as a growing online retail sector. The recent record levels of take-up experienced in both the office and industrial sectors reflected the economic recovery and the growing employment base, with over 44,000 additional jobs created last year, 52 per cent of which were in the Dublin region. However, with the jobs recovery less prevalent outside Dublin, the performance of the core commercial urban markets outside Dublin was less favourable. That said, demand was strong for good quality Grade A office space, with a shortage of same now emerging in Galway, Limerick and Cork. In the retail sector, the rebound in consumer sentiment and retail spending is boosting demand from both overseas and international retailers for well-located stores across the country. As transactions absorb the available office space in Dublin and rents continue on an upward trend, the return of cranes to the Dublin skyline signalled a resumption of office construction activity in the Capital during This is a welcome development and will help to sustain the economic recovery, although much of the supply in the pipeline may not come on-stream until 2017 or later. However, the extent of development in the pipeline has led to some agents raising concerns about oversupply in the medium-term. There is also evidence of some prime movers embarking on industrial development activity in Dublin for the first time since 2007, although the quantum is limited and the expectation is that industrial rents and capital values will rise further this year. The continued shortage of housing supply, particularly in Dublin, is having adverse repercussions for those looking to rent accommodation, with Dublin rents continuing to rise strongly. The trend in house prices is perversely the opposite as Dublin house prices declined modestly in the latter months of However outside of Dublin, residential property price inflation last year was almost double the corresponding rate in the previous year. Whether these trends continue, will largely depend on the outcome of the forthcoming review of the Central Bank s macroprudential rules over the summer. The key challenge for the next government is without question the lack of supply right across the social, rented and owner occupied housing sectors. Until such time as the supply side issue is addressed, accommodation pressures for those entering the jobs market could well undermine the economic recovery. It seems the ongoing appetite for Irish property from domestic and foreign investors continues to surprise as 2015 delivered another strong year in terms of investment activity, both with respect to loan and asset sales. The total investment in Irish property assets (excluding loan sales) reached approximately 3.5 billion in The expectation amongst all property agents for 2016 is that a new phase will emerge in the investment market, characterised by a slowdown in deleveraging activity, and an increase in secondary trading of those assets purchased over the last number of years, as those investors look to generate income from their existing assets but also consider development and refurbishment opportunities. Annette Hughes, Director, DKM Economic Consultants 3

4 Latest News The last five years from PII's perspective On reaching PII s fifth birthday, it is a good opportunity to review PII s policy agenda since 2011 and discuss many of the issues which have brought industry and government together On 2 July, the Irish Times announced that major players in property and construction were intending to launch a lobby group having set aside their own narrow interests in a bid to aid a recovery in the property sector, which, in turn, would boost economic recovery. PII s first report showed that construction output in Ireland related to about 5.9 per cent of GDP in the first quarter of The European average was 11.2 per cent. Bridging that gap would need huge public investment but such an investment would have an immediate economic dividend in job creation. Among the objectives outlined in PII s first policy document was support for the Government s recent jobs initiative and for green economy projects, including energy efficiency retrofitting. A funding group was established by PII to find alternative funding mechanisms for projects and to try to source working capital, first-time buyer mortgages and investor finance packages. The new organisation committed itself to provide constructive input to ensure Nama s long-term positive impact on economic recovery, and planned to provide a policy input to the review on upward-only commercial rental leases. This group very quickly worked with other stakeholders to promote legislation to create Real Estate Investment Trusts In April, PII warned of a dearth of commercial office space in growth areas. While investment in Ireland by Google, Bank of New York Mellon, Citigroup, Facebook, Eli Lilly, PayPal and MasterCard was good news for Ireland, a shortage of high quality office space was a looming problem for economic growth. A 2012 report by PII said that development must be sustainable and is only a means to an end: the provision of sustainable employment for those who live and work in what is built. On 2 July, PII launched its Planning a Better Future report. Amongst its 67 recommendations for reform, it recommended that local authorities with planning powers should be cut from 88 to 34, with all borough and town councils abolished, The report said a redefined planning system should put aside past mistakes and put in place a robust, professionally competent and publicly supported planning process that would contribute positively to the regeneration of Ireland s economy. It wanted the National Spatial Strategy (NSS) to be revisited, with an immediate re-evaluation of the number of identified gateways and hubs, saying that the 2002 strategy has failed to meet its initial objectives [and] remains largely aspirational. While recognising there would be difficult political barriers to be overcome in revising the NSS, the report sought a justified and quantified prioritisation of the nine gateways and nine hubs designated for development 10 years ago. 4

5 2013 In mid-2013, PII warned that a potentially serious problem of undersupply was emerging in areas of the property market and the position was not likely to change until new development is started. It warned that the State and policy-makers were still looking backwards about the oversupply of property in some areas, but this focus on over-supply of some property meant it was easy to miss the looming crisis in the lack of new product on the market. Late in 2013, Property Industry Ireland published its National Property Strategy which urged the Government to encourage professional long-term investment into the private rented sector and extend into next year the seven-year capital gains tax exemption for such purchases The 2014 PII Conference focused on Making Cities Work. Guest speakers included Sir Edward Lister, the deputy mayor of London for planning and infrastructure. The conference covered themes such as investing in sustainable cities, urban geography and spatial development. The pre-budget submission focused on the need to accelerate an existing programme of selling surplus State property by 250m to fund up to 5,500 new social houses and aid the Government in its pledge to end homelessness by PII said that cutting the windfall tax on property that is rezoned from agricultural use to residential to the standard 33 per cent rate, from its current 80 per cent level, would help speed up the supply of suitable land. It also called for a time-limited reduction on the VAT rate on the construction of residential property to 9 per cent, from 13.5 per cent In February, chairman of the PII Market Supply and Demand Committee Mark FitzGerald wrote an opinion piece in the Irish Times in which he said: In the same way that we can t have democracy without politicians, we can t have development without developers. He warned that the new Central Bank mortgage rules were likely to suppress development in the centre of Dublin and ultimately the policy is likely to encourage development in Kildare, Meath and Wicklow. In early 2015, PII made a detailed submission to the Central Bank of Ireland warning of the impact of the proposed lending rules on the supply of new homes and the potential to cause a significant increase in rents. The PII Submission recommended the graduated introduction of lending rules which could be responsive to changes in the market, have different rules for different types of mortgage-holder and recognise the potential second-round impact of the policy on the rented sector and the delivery of new urban homes. On the same day that the Housing Agency warned that only half the required number of homes would be built in 2015, PII published its budget submission. PII sought targeted tax measures and It argued that the Government should change housing standards rules to encourage investment in purpose-built student halls of residences. According to the submission: This should include making student housing a separate property type in planning and design regulations to encourage development of halls of residences in brownfield or under-developed urban areas. The planning process should be accelerated, with local authorities required to rule on planning applications for housing developments and social housing projects within six weeks of receipt of the application. 5

6 Economic Outlook 2015 was an excellent year for the Irish economy but caution is needed The Irish economy experienced spectacular growth in The combination of favourable exchange rates, weak oil prices and low interest rates benefited Ireland more than any other EU country. While final year figures for 2015 are yet to be released, given the strong performance of government tax receipts and employment in the latter part of the year, Ibec expects that GDP growth for 2015 should be 7.1%. This would be the highest growth rate experienced by Ireland in 15 years, making it the fastest growing economy in the EU for two years running. Growth in previous years was heavily concentrated in certain sectors and regions, but 2015 was a turning point with notable improvements made throughout the economy. Given the weak euro, exports grew significantly in 2015 but the primary reason why growth in 2015 exceeded initial expectations was the strong recovery in domestic demand. Investment is estimated to have grown by 27.2% while consumer spending is expected to be up by 3.7% in This strong growth in consumption reflects improvements in wages and employment. Disposable income in the first nine months of the year was up 9% over the same period in 2014.This was reflected in higher consumer activity, but not all of this additional income was spent as savings grew at a faster rate over the period. This strong growth was also accompanied by a stellar performance in the public finances. Tax receipts for 2015 were 3.3 billion ahead of target, reflecting the buoyancy in both the domestic and export sectors of the economy. Much of this additional revenue was due to an overshoot in corporate tax receipts but this combined with strong economic growth has meant that government has reduced the budget deficit and exceeded initial fiscal targets. This upswing in the economy has also been reflected in employment figures, as 2015 saw the creation of roughly 50,000 jobs. This has caused the unemployment rate to fall from double digits at the beginning of the year to less than 9%. While this job growth is now being seen across all regions (barring the West), the pace of this recovery differs greatly amongst them. Employment in Dublin is currently growing by 5% annually compared to 2% in the rest of the country. This will increase pressure on housing and infrastructure in Dublin in the short term and exacerbate regional inequality long-term. While it would be difficult to beat last year s exceptional performance again in 2016, growth this year is still expected to be strong. The weak euro and low oil prices are temporary but they are showing little sign of abating in The continued improvements in the labour market should also have a positive impact on incomes and consumer spending. Early indicators for January already suggest that last year s momentum is likely to continue with the unemployment rate as low as 8.6% and tax returns up 7.3%. That said, there are some serious downside risks to which the economy is exposed. While the Irish economy has benefited from favourable movements which are outside of our control, other economies haven t been as lucky. The global economy is showing signs of a slowdown and this is particularly evident in emerging market economies. Therefore, these transitory gains to Ireland should be viewed with caution. Losses to our overall competitiveness elsewhere in the economy will leave Ireland very exposed once these temporary factors recede. One such weakness in Ireland is the low level of investment, which is currently at its lowest level in recorded history. While private investment has been strong, public investment fell by 57% in the past seven years. This underinvestment in education, transport and other areas of the economy are now at risk of derailing growth in the economy. Without investment, world class education facilities, improved transport and a greater supply of affordable housing, this spectacular growth might disappear as quickly as it came. 6

7 Irish GNP and Components Annual YoY% Change 2014 Consumer spending 2.0 Government spending 4.6 Investment 14.3 Exports 12.1 Imports 14.7 GDP (Volume) 5.2 GNP (Volume) 6.9 GDP (Value) 5.3 Source: CSO, Ibec Forecasts. E = Estimate. F = Forecast. 2015(E) (F) Labour Market and Sectoral Employment (000s annual averages) 2013 Agriculture 107 Industry 343 Services 1,430 Total 1,879 Employment growth (%) +2.4 Unemployed 282 Unemployment rate (%) 13.0 Labour Force 2,163 Source: CSO, Ibec Forecasts. E = Estimate. F = Forecast (E) ,453 1,473 1,911 1, ,157 2, (F) ,506 2, ,192 7

8 Residential Market Activity Just over 8,000 units commenced in 2015 The residential property market in Ireland remained in a challenged position in the second half of Supply continued to be constrained with commencements dropping off to less than 1,800 units in Q4 15 from over 2,700 in the previous quarter. This is a concerning trend as commencements had gained meaningful momentum in both Q2 and Q3 15. Despite the drop-off in Q4 15, and the latent lack of supply to the market in recent years, total commencements for the second half of 2015 were more than double the total for the same period in 2014 and were up, in annual terms, by almost 19 per cent in the full year. The number of residential units granted planning permission also fell on a quarterly basis by 12 per cent in Q3 15 (latest available), indicating a weak pipeline for residential development. Within the total, the number of houses granted planning was down by almost 300 units QoQ, albeit the number rose by 32 per cent YoY. Cumulatively the total units (houses and apartments) granted planning recorded a YoY increase of 24 per cent, although from a low base. That said, just less than 11,000 units had planning permission in the year to Q3 15, of which less than 1,500 were for apartments. Completions (i.e. electricity connections) increased at a robust quarterly rate of 14 per cent in Q4 15, generating a total of 12,666 in the year, an annual increase of almost 15 per cent. Although growing, completions remain significantly below what is being commenced just over 8,000 in implying the number of units constructed will need to increase substantially over the next two years to meet the excess demand for housing that currently exists. Property transactions in the final quarter of 2015 recorded mixed results, increasing at a quarterly rate of 4 per cent but declining YoY by 22 per cent. Over 12,000 transactions occurred across the country in Q4 15 and this represented the third consecutive quarterly increase since market activity contracted sharply in Q1 15. Around 45,000 (per DKM methodology) residential property transactions occurred in 2015, an increase of almost 7 per cent on the 2014 outturn. Activity accelerated significantly across all counties in the year, illustrating how the recovery in the residential market is spreading out from Dublin and the other urban centres. As the Central Bank rules became fully bedded down in the last quarter of 2015, it is interesting that the numbers of mortgage drawdowns increased by 6.4 per cent when mortgages involving a house transaction only are included, compared with almost 16 per cent in the previous quarter. The corresponding value increase was 4.2 per cent, down from 22.6 per cent the previous quarter. Surprisingly loans to first-time buyers (FTBs) were up by 4 per cent in Q4 15 but declined in YoY terms by 5.4 per cent. However, the average FTB loan at almost 171,500 was up by 2.6 per cent YoY. The prevalence of cash buyers remained a feature of the market in Q4 15, when the number of mortgage drawdowns (8,103) is compared with total residential transactions (12,065) in the quarter. The overall proportion of cash buyers in 2015 was around 46 per cent. On a regional basis, Dublin dominated residential construction with over one-third of all commencements arising in the Capital in Q4 15. Commencements were weakest in the Midwest (Limerick, Clare and Tipperary) and Midlands (Laois, Longford, Offaly and Westmeath) with fewer than 100 commencement notices in each region. The greatest proportion of completions arose in Dublin at 22 per cent, but this was more closely followed by the Southwest (17%) and Mideast (13%). As 2016 gets underway and a new government is put in place, the housing challenges across the social, private rented and owner occupied sectors are likely to remain very much to the fore for the foreseeable future. 8

9 Residential Market Activity Q2 15 Q3 15 Q4 15 QoQ YoY Units Granted Planning 3,010 2,662 N/A -12% +24% - Houses 2,637 2,345 N/A -11% +32% - Apartments N/A -15% -12% Commencements 2,313 2,707 1,745-36% of which one-offs % +65% +48% Loan Approvals Q2 15 Q3 15 Q4 15 QoQ YoY Total Number of Loan Approvals 7,576 7,965 7,124-11% -15% - House Purchase 6,779 6,980 6,131-12% -20% - Top Ups/Remortgage % +53% Total Loan Approval m 1,394 1,465 1,345-8% -12% - House Purchase m 1,295 1,338 1,188-11% -18% - Top Ups/Remortgage m % 1+89% Registrations* 1,157 1, % Completions** 2,996 3,289 3, % Transactions*** 10,941 11,557 12,065 +4% -4% +16% -22% National Housing Stock (000s) 2,010 2,012 2,015 0% 0% Mortgage Drawdowns Total Number of Drawdowns 6,250 7,292 8, % +7% - House Purchase 5,604 6,494 6,911 +6% 0% - Top Ups/Remortgage , % +82% Total Drawdowns m 1,085 1,330 1,452 +9% +8% - House Purchase m 1,005 1,232 1,284 +4% +1% - Top Ups/Remortgage m % +133% FTB Drawdown - Average 166, , ,486 0% +3% Regional Commencements Q4 15 Regional Completions Q4 15 Regional Transactions Q , , , , , , , Border West Midlands MidEast Dublin SouthEast SouthWest MidWest Border West Midlands MidEast Dublin SouthEast SouthWest MidWest Border West Midlands MidEast Dublin SouthEast SouthWest MidWest Source: ww.environ.ie *MidWest includes all of Tipperary Source: *MidWest includes all of Tipperary Source: MidWest includes all of Tipperary *Registrations refer to the number of units registered with Home Bond and Premier Guarantee. **Completions are measured as connections to ESB. *** Transactions data excludes properties that are not full market price and those under 20,000 and over 5 million. QoQ refers to the latest quarter on quarter percentage change (Q4 on Q3). YoY refers to the latest year on year percentage change (Q on Q4 2014). Loan Approval and Mortgage drawdown data from 9

10 Residential Property Prices Little or no change in asking prices while sold prices were mostly lower in Q4 Reversal of trend in property price growth as the rest of Ireland overtakes Dublin The two-speed recovery in Irish residential property prices has seen a clear distinction develop between Dublin and the rest of the country over the past number of years, up to and including Q4 15. Dublin recorded the strongest rates of price growth in previous years, as the recovery took hold first in the Capital, before extending to other regions around the country. However, this trend has reversed to a remarkable degree in recent quarters as price growth in the rest of Ireland has significantly exceeded that recorded in Dublin. This is considered to be a consequence of a delayed recovery outside the Capital, combined with the effects of the Central Bank s lending rules. This trend is illustrated in the range of house price indicators included in the table opposite, where house price inflation has recently been strongest in the rest of Ireland. In terms of asking prices, Daft.ie reported that property prices outside Dublin in Q4 15 were 13.1 per cent ahead of the same period in This contrasts strikingly with Dublin where house prices had risen by only 2.7 per cent over the year. The CSO s residential price index, based on mortgage transactions, reflected a similar scenario with prices outside Dublin rising by 10.2 per cent YoY in Q4 15, far in excess of the 3.5 per cent growth recorded in the Capital. Finally, Daft.ie s data on the average sold prices across the country provides further evidence of this trend with the mixadjusted annual average (MAAA) house price growth in Dublin falling by 0.4 per cent YoY in Q4 15, considerably lower than the robust growth rate of 7.6 per cent recorded for average sold prices across the rest of the country. The Knight Frank Prime Dublin Residential Index, which monitors the top 5 per cent of the residential market by market value, comprising the very high end of the Dublin residential property market, reported modest growth of around 1 per cent in YoY terms. The two speed recovery in residential prices which has taken hold across the country has had a significant effect on the rental market, particularly when considered against the persistent lack of new housing supply. Potential first-time buyers are now required to build up larger deposits while mortgages are capped at 3.5 times annual income, meaning that a substantial proportion of the Capital s first-time buyers now find themselves having to rely on the rental market for longer periods of time. This effect has been most severe in the supply- restricted Dublin region where MAAA residential rents in Dublin reached 1,435 in Q4 15, according to Daft.ie, an increase of 8.2 per cent YoY. Residential rents outside the Capital are considerably more affordable but also increased at a significant rate of 9.8 per cent YoY in Q4 15 to reach an average of 727. The PRTB s standardised rents portray a similar picture for Q3 15, with rents in Dublin 8.7 per cent higher than in the same quarter in Rents across Ireland also rose by in excess of 8.5 per cent YoY indicating how pressurised the rental market has become in recent times. On a quarterly basis, it became evident in Q4 15 that growth in residential property prices was generally slowing across Ireland. The MyHome National and Dublin MAAA asking prices were flat in the quarter; similar trends are evident from Sherry FitzGerald s National and Dublin price valuation indices. Daft.ie reported a slight decline in asking prices QoQ on a national basis, with sold prices also falling across the country by 2.6 per cent in the quarter. 10

11 Residential Property Prices ASKING PRICES Daft.ie National MAAA* ( ) Daft.ie Dublin MAAA* ( ) Daft.ie National ex. Dublin MAAA* ( ) 202, , , , , , , , ,838 MyHome National MAAA* ( ) 201, , ,031 0% +6% MyHome Dublin MAAA* ( ) 281, , ,921 0% +6% NATIONAL PRICE VALUATIONS Sherry FitzGerald: National (Index Q4 2001=100) % +4% Sherry FitzGerald: Dublin (Index Q4 1995=100) % +1% Knight Frank Prime Dublin Residential (Index Dec 2012 = 100) PRICES BASED ON MORTGAGE TRANSACTIONS Q2 15 Q3 15 Q QoQ -1% 0% -1% YoY +9% +3% +13% +3% +1% CSO National (Index 2005=100) % +7% CSO Dublin (Index 2005=100) % +4% CSO National ex. Dublin (Index 2005=100) SOLD PRICES % +10% PPR National Average 216, ,024-2% +9% PPR Dublin Average 323, , ,507-2% +13% PRR National ex. Dublin Average 157, , ,839 +2% +14% Daft.ie National MAAA* 193, , ,171-3% +4% Daft.ie Dublin MAAA* 303, , ,197-3% 0% Daft.ie National ex. Dublin MAAA* 150, , ,303-2% +8% RESIDENTIAL RENTS PRTB National Standardised Rents N/A +4% +9% PRTB Dublin Standardised Rents 1,244 1,277 N/A +3% +9% Daft.ie National MAAA* ( ) % +9% Daft.ie Dublin MAAA* ( ) 1,368 1,409 1,435 +2% +8% Daft.ie National ex. Dublin MAAA* ( ) % +10% * MAAA = Mix-Adjusted Annual Average QoQ refers to the latest quarter on quarter change. YoY refers to the latest year on year change. *** Transactions price data excludes properties that are not full market price and those under 20,000 or over 5 million but includes VAT. Average Sold Price by County Q Dublin 380,507 Wicklow Kildare Meath Cork Galway Kilkenny Kerry Louth Carlow Wexford Laois Sligo Limerick Waterford Monaghan Clare Tipperary Westmeath Mayo Offaly Donegal Cavan Leitrim Roscommon Longford 309, , , , , , , , , , , , , , , , , , , , , ,525 95,801 89,886 85,821 Source: Property Price Register, DKM Analysis *** Transactions price data excludes properties that are not full market price, those under 20,000 or over 5 million and includes VAT 11

12 Commercial Office Market Oversupply not an immediate concern All of the property agents commentaries on the outturn for 2015 report the strong uplift in the volume of office market activity last year. In a market comprising a stock of around 3.34m 2 at the end of 2015 (DTZ SF), the total take-up came in at an average of around 252,000m 2. This figure is based on estimates from five property agents, which range from 224,700m 2 (DTZ SF) to 270,400m 2 (Lisney). While each agent reports somewhat different historical figures for each year, there is a general consensus that the 2015 take-up level was the highest annual level since A number of agents compare the 2015 outturn with trends historically, notably the five year average annual take-up in Dublin of 266,630m 2 (JLL), the ten year average annual take-up of 177,000m 2 (CBRE) and the long-run annual average of 145,850m 2 (DTZ SF) over the last nineteen years. In terms of Q4 15, all five agents with the exception of DTZ Sherry FitzGerald, reported higher take-up compared with the previous quarter. The increase was almost 100 per cent, according to Lisney. There were five large transactions in Q4 in excess of 5,000m 2. The IT sector dominated the market, accounting for the two largest transactions in the quarter. The first was to the technology company, Workday, which has agreed to lease around half of the space in the Kings Building at the rear of the Four Courts. The company is reported to have negotiated a rent of 269 per m 2 ( 25 per sq ft) for 8,815m 2 under a 10-year lease. The second was to Twitter, which is to move into the 10,405m 2 Cumberland House later this year, following a 27 million refurbishment by Hibernia REIT, who acquired the building in March Twitter is reported to be taking a 20 year lease on the majority of the building, with tenant-only break options after 12 and 15 years, and to be paying rent of 538 per m 2 ( 50 per sq. ft). Take-up in Dublin city centre totalled 138,360m 2 on average across five agents, ranging from 78,900m 2 (DTZ Sherry FitzGerald) to 172,200m 2 (CBRE), corresponding to 55 per cent of the total average take-up take up across Dublin last year. Ongoing supply constraints in Dublin city centre are reported to have shifted occupier demand to the secondary and suburban markets, with the south suburbs being the most sought after location. Three agents reported a decline in the overall Dublin office market vacancy rate again in Q4 to between 8 and 9 per cent (CBRE, JLL, KF), while two agents reported a year-end vacancy figure between 11 (Lisney) and 13 per cent (DTZ SF). While the lack of supply is particularly acute in the South Docks Area, a number of agents have raised concerns about oversupply in the Dublin office market. Estimates vary of the volume of office space under construction at the end of 2015, ranging from 209,950m 2 (DTZ SF) to 270,000m 2 (in 23 office schemes, CBRE) to close to 280,000m 2 (JLL). Excluding the Space which has been pre-let, suggests there are in the region of 170,000m 2 left to meet demand over the coming years. In the city centre, Lisney have reported that there are 12 office schemes or extensions to existing buildings under construction, comprising a total of 103,500m 2 of new accommodation. Excluding pre-lets, Lisney suggest there are 43,700m 2 available in the city centre, which is substantially short of the quantum of take-up in 2015, implying any immediate concerns about oversupply are not justified. Thus, while oversupply is not considered to be an immediate concern, there is significant development in the pipeline, with another 40 schemes planned for the city centre alone, totalling in excess of 560,000m 2, albeit not all of these will proceed to construction, according to Lisney. A number of agents suggest that 2016 is more likely to be a year characterised by a reduction in good quality space in the city centre, resulting in little choice for tenants and further rent increases, with tenants forced to look to the suburbs for space. This is expected to generate faster growth in rents in the suburbs compared with the city centre, a trend which may already be happening. 12

13 Snapshot of Dublin Office Property Market Indicators Dublin Take-Up ( 000m 2 ) Q2 15 Q3 15 Q4 15 YTD Dublin Vacancy Rates (%) Q2 15 Q3 15 Q4 15 QoQ CBRE CBRE pp DTZ Sherry FitzGerald Sherry DTZ Sherry Fitzgerald FitzGerald pp pp pp -0.4pp JLL JLL pp pp pp -0.1pp Knight Frank Knight Frank pp Lisney Lisney pp Dublin City Centre Take-Up ( 000m 2 ) CBRE Dublin City Centre Vacancy Rates (%) CBRE pp DTZ Sherry FitzGerald DTZ Sherry FitzGerald pp JLL JLL pp Knight Frank Lisney pp Lisney Dublin CBD Vacancy Rates (%) Dublin Vacant Stock/Availability ( 000m 2 ) CBRE pp DTZ Sherry FitzGerald N/A DTZ Sherry FitzGerald pp JLL N/A Lisney pp Lisney N/A Dublin Office Yields (%) Dublin City Centre Rents ( /m 2 ) Q2 15 Q3 15 Q4 15 QoQ CBRE pp CBRE % DTZ Sherry FitzGerald pp DTZ Sherry FitzGerald % JLL pp JLL % Knight Frank pp Knight Frank % Lisney pp Lisney N/A Dublin Prime Rents ( /m 2 ) CBRE % DTZ Sherry FitzGerald % JLL % Knight Frank % Lisney % QoQ refers to the latest quarter on quarter percentage or percentage point change (Q4 on Q3). YTD refers to year to date, i.e. four quarter to

14 Commercial Property Market Multinationals a key driver of industrial demand while UK and international brands look to key retail locations The strong demand for industrial space in Dublin continues The last quarter of 2015 saw a remarkable level of take-up in Dublin varying from 86,000m 2 (Lisney) to 115,579m 2 (CBRE). This brought the total take-up in 2015 to between 391,000m 2 (JLL) and 428,100m 2 (CBRE). This implies an average take-up last year of around 408,000m 2 which is only the fourth time in 21 years that industrial take-up has reached 400,000m 2 in Dublin (Lisney). Using JLL s figures, the total take-up in 2015 exceeded the previous 2014 peak of 271,405m 2 by 44 per cent. Within the year there were 12 very large transactions exceeding 7,000m 2 (Lisney) which represented approximately one third of the total activity, indicating that the high industrial take-up in Dublin in 2015 was highly influenced by a few very large transactions. Multinational corporations have had a particularly large effect on industrial take-up in Dublin (Lisney). Activity during Q4 15 was focused around Dublin South West which accounted for 49 per cent of total take-up in Dublin (JLL). However throughout 2015 the supply of modern industrial space in prime locations has decreased rapidly. Additionally the limited number of construction projects currently in progress forced industrial prime rents upward to between 75 (CBRE) to 78 (JLL) per m 2 in Q4 15. Rents are expected to continue to increase into 2016 and beyond as growing demand exceeds supply (CBRE). The available supply decreased throughout 2015 to below 950,000m 2, the lowest level since 2009, resulting in the Dublin vacancy rate falling to an estimated 15 per cent (Lisney) looks set to be another strong year with companies linked to online retailing distribution, pharmaceuticals and data centres (JLL) expected to drive demand. Overall the industrial sector is recovering fast. The continued supply quality issue and lack of new construction will drive up industrial rents and decrease the vacancy rate, but this should also encourage investors and contractors to start building again. All indicators point to a busy year for retailers There are several positive trends emerging in key indicators which will drive a greater level of activity in the retail property sector. An upward trend in the KBC/ESRI Consumer Sentiment Index during 2015 was encouraging, while there was also an 11.4 per cent YoY increase in domestic demand in Q Total employment was up by 56,100 in the year to Q3 2015, and the growth in retail sales volumes accelerated to 8.3 per cent in Reports suggest that the retail property market is experiencing increased demand from both domestic and overseas retailers, with that demand spreading out beyond prime city areas. The very significant Project Jewel retail portfolio transaction in the latter half of 2015 may result in others looking to the Irish market for retail investment opportunities. Indeed DTZ Sherry FitzGerald suggest that retail accounted for 27 per cent of the overall property investment turnover in 2015 with around 1 billion of retail property changing hands. Overall retail rents rose by 10.4 per cent in 2015 (Lisney). However, serious challenges remain outside of Dublin, most notably in the Connacht/Ulster region, where prime rents declined by almost 36 per cent in 2015, according to the Society of Chartered Surveyors (SCSI Property Review & Outlook 2016). That said, CBRE expects the highest growth in rental value during 2016 to take place outside of the core Dublin market. A key challenge in 2016 will be finding retail premises for retailers interested in high street locations or in sought after schemes, many of which are reported to be close to or at full occupancy. The volume of new retail development activity is substantially behind what is going on in the office market. However, construction is expected to get underway at the Frascati Shopping Centre redevelopment in Blackrock in 2016 and the planning application for the retail-led town centre in Cherrywood will be submitted this year, with construction expected to commence towards the year-end. A number of retail refurbishment schemes are also expected to commence this year. 14

15 Snapshot of Dublin Industrial Property Market Indicators Dublin Take-Up ( 000m 2 ) CBRE DTZ Sherry FitzGerald JLL Lisney Dublin Vacant Stock/Availability ( 000m 2 ) DTZ Sherry FitzGerald Dublin Prime Rents ( /m 2 ) CBRE DTZ Sherry FitzGerald JLL Lisney Dublin Vacancy Rate (%) DTZ Sherry FitzGerald Dublin Yields (%) CBRE DTZ Sherry FitzGerald JLL Lisney Q2 15 Q3 15 Q4 15 YTD N/A ,113 1,046 N/A Q2 15 Q3 15 Q4 15 QoQ % % % % N/A pp pp pp pp QoQ refers to the latest quarter on quarter percentage or percentage point change (Q4 on Q3). YTD refers to year to date i.e. four quarter to

16 Commercial Regional Market Mixed signs of recovery Information on the regional property market in the main urban areas - Cork, Galway and Limerick - is based on data provided by DTZ Sherry FitzGerald. There is further information available from Lisney on the Cork property market. At the outset it is noted that the stock of office accommodation across the three markets was million m 2 at the end of 2015, which corresponded to 35 per cent of the total stock in the Dublin market. Cork had the largest stock of office accommodation (549,000m 2 ) followed by Limerick (324,350m 2 ) and Galway (301,750m 2 ) at the end of 2015, according to DTZ Sherry FitzGerald. With recovery in the economy and the jobs market beginning to spread out to other urban areas, signs of a pick-up in activity in the regional property markets should be emerging. However a review of the total take-up of office accommodation shows all three markets recorded a decline in Q4 compared with Q3, with take-up levels substantially higher in the first half of 2015 in Cork and Galway. Over the full year, the total take-up was highest in Limerick (29,300m 2 ) and lowest in Galway (17,100m 2 ). In contrast Lisney reported a higher level of take-up in Cork in Q4 15 compared with the previous quarter, which they partly attributed to an active multinational sector, culminating in a total take-up of 19,310 m 2 for 2015 as a whole. The disparity in terms of vacancy rates is significant with Limerick s vacancy rate over four times the corresponding rate in Galway. Vacancy rates at the end of 2015 were marginally higher in Cork (15.6%), marginally lower in Galway (4.5%) and unchanged in Limerick (18.5%) compared with the previous quarter. Prime rental levels ended the year unchanged in Cork and Limerick at 250 per m 2 and 172 per m 2 respectively, although rents closer to 280 per m 2 were achieved in Cork city centre. DTZ Sherry FitzGerald are projecting rent increases across the board in 2016, with rents per m 2 expected to rise to 200, 245 and 285 in Limerick, Galway and Cork respectively. In terms of construction activity, a total of 33,750m 2 were under construction across the three counties at the end of The largest quantum was in Cork where the main development consists of the 15,793m 2 new office scheme at One Albert Quay in the city, which is set to be fully-let on completion over the coming weeks. Its tenants include PWC, Investec Bank, Arup, the internet security firm Malwarebytes and Ardmore Shipping Corporation. The recent commencement of the mixed-use development of 11,782m 2 at the Capitol Cinema site on the Grand Parade in the city, which is expected to include around 3,100m 2 of Grade A office space, is expected to be completed in February DTZ Sherry FitzGerald reported the second highest level of take-up on record in Limerick and significantly above the long-run average. The exceptional take-up in Q3 15 reflected the occupation by Analog of around 13,050m 2 in Raheen, County Limerick. A total of almost 166,000m 2 of space was available across the three counties at the end of The available stock situation was exceptionally tight in Galway at the year-end. The proportionate split of total accommodation available in 2015 between the city centre and the suburbs was 48/52 in Galway, 40/60 in Cork and 45/26 in Limerick, with the balance of 29 per cent in the Shannon Free Zone. Around 83 per cent of the available space in Cork was Grade A accommodation, of which almost two-thirds was in the suburbs. Shortage of industrial buildings in the most sought after locations in Cork There is limited Q4 15 information available on the industrial market outside of Dublin apart from research on the Cork market by Lisney. The latter reported total take-up in 2015 of 37,070m 2 which was supported by a strong export sector. There was an available industrial building stock of 217,000m 2 at the end of the year and with no new construction underway, this figure can be expected to fall over the coming quarters. The vacancy rate was 17.4 per cent at the end of 2015, down from 18.2 per cent one year earlier. Industrial rents were reasonably stable, according to Lisney, at in the region of per m 2. 16

17 Regional Market Indicators TAKE-UP (m 2 ) Cork* Cork Galway Limerick VACANT STOCK/AVAILABILITY (m 2 ) Cork* Cork Galway Limerick PRIME RENTS ( /m 2 ) Cork Galway Limerick VACANCY RATE (%) CORK Cork Overall Cork City Centre Cork Suburbs GALWAY Galway Overall Galway City Centre Galway Suburbs LIMERICK Limerick Overall Limerick City Centre Limerick Suburbs Limerick Shannon Free Zone *Source is Lisney. All other data is from DTZ Sherry FitzGerald. OFFICES INDUSTRIAL Q2 15 Q3 15 Q4 15 YTD Q2 15 Q3 15 Q4 15 YTD 5,990 3,570 4,880 19,310 9,940 11,000 5,750 37,070 5,750 5,300 1,550 22,100 13,250 45,000 N/A 3,800 2,700 2,250 17,100 7,650 24,750 N/A 2,750 16,900 5,700 29,300 11,700 55,800 N/A 93,700 97,000 95, , , ,000 86,850 84,650 85, , ,050 N/A 22,450 13,900 13,600 42,700 43,600 N/A 75,750 71,200 66, , ,950 N/A Q2 15 Q3 15 Q3 15 QoQ Q2 15 Q3 15 Q4 15 QoQ % N/A % N/A % N/A pp pp pp pp pp pp pp pp pp pp QoQ refers to the latest quarter on quarter percentage of percentage point change (Q4 on Q3). YTD refers to year to date i.e. four quarter to

18 Investment Market 2015 records the second highest turnover of commercial real estate investment It seems the ongoing appetite from domestic and foreign investors for Irish property continues to surprise as 2015 delivered another strong year in terms of investment activity, both with respect to loan and asset sales. Estimates for the total investment in Irish property assets (excluding loan sales) achieved in 2015 range from 3.4 billion (JLL) to 3.5 billion (CBRE) to 3.7 billion (DTZ SF and Lisney). Although lower than the all-time record level achieved in 2014 (c. 4.5bn), this figure is remarkable given the size of the Irish economy. CBRE suggest that one-third of the total spend in 2015 was from Irish investors, implying the balancing figure demonstrates the level of confidence international investors have in the Irish economy and its future prospects. An exceptional Q4 15 performance, with in the region of 1.2 billion (JLL) to 1.4 billion (DTZ SF) of transactions recorded, contributed to this remarkable outturn. An interesting analysis on the geographical split of the volumes traded in Q4 15 by JLL showed that 53 per cent were in Dublin compared with 94 per cent in the previous quarter. It remains to be seen whether this shift in investment to outside of Dublin continues in NAMA has made a significant contribution to the volume of asset and loan sales, as it continued its deleveraging activity during It has sold in the region of 27.2 billion of assets and loans since its inception, with close to 19 billion in 2014 and 8.5 billion achieved in The largest single transaction involving NAMA in 2015 would have been the Project Jewel loan portfolio sold for almost 1.85 billion (nominal value excluding discount), comprising loans relating to the Dundrum Town Centre, the Ilac shopping centre (50% share), the Pavilions shopping centre (50% share) and a 5.3 acre development site in Dublin city. The portfolio was acquired by the UK listed property company Hammerson and Allianz Real Estate of Germany. NAMA is reported to have a further 11.1 billion of assets to sell in Ireland and sees the challenges in doing so as comprising competition from secondary trading of assets by private equity funds and from other European markets, notably the recovering economies of Spain and Italy, as well as economic and timing risks. It is currently preparing to bring in the region of 6.5 billion (outstanding debt balances) of real estate to the market over the coming months comprising two loan portfolios, Project Emerald and Ruby. Green Property and Green Reit is selling a significant retail asset, in the form of the Blanchardstown Town Centre, which is expected to generate in excess of 1 billion. Green Reit is also disposing of the assets in the Glas Portfolio, which consists of over 69,677m 2 of commercial space across 58 commercial units. Four of the six properties are in Dublin: the Arena Centre in Tallaght, which has 63 apartments and a 119 bedroom hotel, the Ormond Office Building in Dublin City Centre, Classon House in Dublin 14 and Parnell Car Park in Dublin 1. The portfolio also includes the Globe Retail Park in Naas and the Parkway Retail Park in Limerick. The expectation amongst all property agents for 2016 is that a new phase will emerge in the investment market, characterised by a slowdown in deleveraging activity, and an increase in secondary trading of those assets purchased over the last number of years, as those investors look to generate income from their existing assets but also consider development and refurbishment opportunities. Overall investment turnover is expected to continue to fall to a more sustainable and normal level, estimated by Lisney to be of the order of 2 billion per annum. 18

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20 Special Report The property industry s role in securing Foreign Direct Investment (FDI) This special report was authored by Mary Buckley, Executive Director, IDA Ireland. In January 2016, IDA Ireland announced the highest level of employment across its client companies in its 67 year history. Overseas companies now employ over 187,000 people across Ireland. All sectors and regions have benefited with 53 per cent of all jobs created located outside of Dublin. These results represent the first year of IDA s strategy: Winning Foreign Direct Investment which sets ambitious objectives: - 80,000 new jobs, 900 investments, and 3bn in R&D investments and a strong focus on winning Regional investments. The Property and Construction sectors have a critical role to play in supporting the delivery of these challenging targets. Property and infrastructure availability is a clear differentiator in the decision making process on where companies locate their investments. Investments of note in 2015 included Apple and Facebook and their respective plans to build data centres in Athenry and Clonee, Regeneron s expansion of its Limerick campus, Pramerica's expansion in Letterkenny. West Pharma also commenced site works in Waterford while ABEC Inc. announced plans to expand its global operations in Fermoy. Many of the projects won in 2015 were capital intensive, and provided strong additional benefits beyond the jobs themselves. More than one-in-five private sector jobs in the economy (direct and indirect employment) are as a result of FDI investments, while overseas companies continue to be significant exporters from Ireland. IDA client companies also accounted for approximately 65% of all corporate tax receipts in In the construction sector, FDI activity has generated approximately 10,000 jobs and this positive trend is likely to continue into For its part, IDA with the support of the Irish Government has commenced the rollout of its 5 year 150 million property investment programme to deliver flexible and cost competitive site and building solutions in designated regional locations. In 2015, IDA oversaw the delivery of new office and manufacturing facilities in its Business Parks in Athlone, Waterford, Letterkenny and Galway and plans for 2016 include delivering building solutions into Castlebar, Sligo, Tralee and Galway. IDA remains committed to leveraging partnership opportunities with developers and investors to deliver pre-permitted buildings on IDA Business Parks in designated regional locations. Flexible and cost competitive building solutions remain crucial. Every investment is hard won against ever increasing competition from a growing range of sophisticated and innovative global business locations. We must not be complacent in this regard. From an international perspective Dublin represents our strongest hand as an international investment location. It is home to the largest portfolio of FDI companies in Ireland with some of Europe s most vibrant business clusters i.e. Financial Services and Technology sectors. It is imperative that Dublin enhances its reputation and remains attractive and the Dublin Office Market for FDI remains critical in that regard. The availability of talent remains the biggest driver for IDA client companies in their international investment location decisions, and the supply of quality and affordable residential accommodation is thus a key competitiveness factor. More private sector residential development will be required to meet the demand of FDI companies employees in some regional locations and in Dublin City. IDA welcomes the recent announcement by NAMA to fund the delivery of 20,000 residential units by the end of The ongoing supply of flexible and cost competitive office solutions, spearheaded by the estimated c. 3 million sq.ft. of new office supply for Greater Dublin by 2018, is very welcome. Supply remains tight currently in parts of the CBD where an ongoing, sustainable supply is important. There is however a strong property offering available and strong value to be had depending on the location in Dublin. It is positive to see the required proactivity by all key stakeholders on this agenda at the present time. The onus, in my view, is on us all to ensure that we maintain and develop attractive locations for our people to live and work, and we need a sustainable functioning construction sector to support this. 20

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22 AIB s Specialist Property Lending Unit Supporting Residential Development Paul C McNamara FSCSI FRICS Head of Property Strategy & MI Property Lending Unit AIB Wholesale and Institutional Banking *Department of the Environment, Community and Local Government It is now well accepted that currently the level of house building in Ireland is falling well short of the numbers needed to house both our existing households and to meet the demands of new household formation. In 2014 the number of housing units completed nationwide only amounted to 11,016* and in 2015 the number of units completed nationally was 12,666*. When contrasted to the numbers of homes that are likely to be needed each year, it is no surprise that those wishing to buy a home are finding the supply of new and second hand stock to be very limited indeed. Research by Sherry Fitzgerald shows that in July 2015 there was only 1.7% of the second hand private housing stock on the market nationwide. This is considerably lower than would be expected in a normally functioning market. AIB, through the Land & Development team in the Property Lending Unit (PLU) and through our network of New Business Centres is currently supporting the development in excess of 1,400 residential units and we are actively engaged in discussions with the sponsors of over 800 further homes. The Property Lending Unit is designed by the Bank to be a centre of excellence and a number of property and construction specialists have been recruited to support the residential development lending activity of both the PLU and the Business Banking teams. These specialists include both Chartered Surveyors and Engineers who work closely with our lenders and our customers. AIB adopts a proactive approach to such development opportunities and we see the relationship between the bank and the customer as one very much of a partnership to ensure the best outcome for both parties. Early engagement by our lending teams with our customers ensures that projects can be run efficiently and smoothly and the focus is on progressing developments efficiently to completion. Projects the bank is currently supporting are varied and include developments in the Greater Dublin Area such as Hansfield, Rathgar, Kinsealy, Churchtown and Swords and in Limerick city, Killaloe Co Clare and in Cork city. These developments range from smaller infill schemes to larger multi-phase developments involving hundreds of homes. AIB is delighted to be working with Capital Homes in the delivery of Landen Park, Oldtown, Naas Co Kildare. This is a development of 110, 4 bed detached and semidetached houses which are constructed to achieve A rated energy efficiency standards and range in size from 1,530 sq ft up to 2,050 sq ft. Michelle Mullaney, Operations Director with Capital Homes said of this development and their relationship with AIB, In creating our vision for Landen Park we have brought together a highly skilled team of professionals all of whom have long-run experience in residential development. AIB provided initial partfunding for Landen Park through the New Business Team-East headed by Ray Lynch. Ray and his team were supportive of the project from the outset and proactively engaged with us to build a positive working relationship. Landen Park is now well underway with over 40 homes now completed. AIB is committed to working with capable parties to deliver homes throughout all parts of the country where demand is evident for the stock and the developments can be shown to be economically viable. The bank has structured itself to accommodate the delivery of this funding in keeping with our brand values of keeping it simple and making it easy for our customers to engage with the right people and teams in the bank. As part of the bank s full service provision, AIB is particularly active in the provision of mortgages to home buyers. As the mortgage market continues to recover, with a 26% growth in 2015, AIB remains the largest provider, growing by 32% and providing mortgages to nearly 10,000 customers in Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland. 22

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24 Methodologies CBRE Ireland work off standard definitions across EMEA to ensure consistency and facilitate comparison. Our definition of vacant stock is all stock that is being marketed to let at the end of each quarter. Vacancy rate in turn is all available stock expressed as a percentage of overall stock at the end of each quarter. Grade A vacancy rate refers to all Grade A stock expressed as a % of overall stock at the quarter-end. Take-up refers to all leasing activity in the office sector whereas our definition of take-up also encompasses sales in the industrial sector. We analyse Dublin offices by collating stats by the following postcodes/districts; Dublin 1/3/7, Dublin 2/4, Dublin 6/8, IFSC, North Suburbs, South Suburbs and West Suburbs. Our definition of city centre includes the postcodes of Dublin 1/3/7, Dublin 2/4, Dublin 6/8 and the IFSC while our definition of CBD is Dublin 2/4 only. Prime rent refers to the prime headline rent being quoted in the market at a particular point in time while prime yield refers to a net equivalent yield for a prime property let to a strong covenant on an FRI lease with 10 years unexpired and subject to open market reviews (upwards and downwards). Contact: marie.hunt@cbre.com DTZ office take up records occupation of a building by a tenant. In a bid to avoid double counting and to accurately track net absorption rates, signed and reserved space is excluded. Lease re-gears are also omitted. Industrial take up comprises letting and sales activity. Both office and industrial take up exclude investment transactions. The vacancy rate for the Dublin office market is calculated excluding Georgian accommodation. The vacancy rate for the Limerick office market is calculated excluding Georgian accommodation. The vacancy rate for the Cork industrial market excludes the South East and Ringaskiddy. The Central Business District incorporates the prime area of Dublin city and extends to the IFSC and the North & South Docklands and prime fringes such as Ballsbridge. Contact: marian.finnegan@sherryfitz.ie In the Dublin office sector, the City Centre region is taken as in the east, all areas from the Merrion Gates to East Wall Road; in the north, along the canal ring; in the west, to Kilmainham; and in the south, along the canal to Ballsbridge and then all areas east of here to the Merrion Gates. For the purposes of this report, we have taken the CBD to include the traditional core in Dublin 2 plus the docklands; those parts of Dublin 1 and Dublin 7 that are along the quays; and the parts of Dublin 4 and Dublin 8 that are adjacent to Dublin 2. Contact: abrennan@lisney.com The information is based on JLL primary data which is collected and analysed on a quarterly basis. Data is evidence-based and uses information from actual market transactions during the quarter. Office stock comprises all Dublin stock constructed post-1960 and therefore does not include Georgian properties. Office demand is recorded by using gross take-up levels for all deals (lettings and sales). This includes expansions, relocations, and new occupiers. JLL industrial take-up records the letting and sales activity by occupiers of space that has been released onto the market. It does not include land sales, investment transactions or lease re-gears. Prime rents represent the highest achieved rents for the best-quality (Grade A) properties in the core locations that were recorded for that quarter. The yields reported are based on evidence from transactions and reflect the prime yields for each sector. Contact: hannah.dwyer@eu.jll.com The Sherry FitzGerald Barometer of second-hand house prices is an analysis based on a repeat valuation method. This index has been in place since 1996 for Dublin and 1999 for the national market. It analyses trends in the second hand market only, based on an analysis of a basket of properties in all of our locations nationwide. Each basket of properties was chosen based on a weighted profile of properties in each location. The basket extends to over 1,500 properties. The price of a sample of properties that sold in a particular period is re-valued each quarter and these valuations are used to construct a house price index for existing houses. Repeat valuation of a fixed sample of properties ensures that the mix does not change between time periods and it also provides live up to date market analysis, without any lag which an analysis of mortgage drawdowns is subject to. It also facilitates an analysis of both the active and inactive elements of the market thereby giving a fuller picture of market deflation. Contact: marian.finnegan@sherryfitz.ie The statistics are based on properties advertised on Daft.ie for a given period. The regressions used are hedonic price regressions, accounting for all available and measurable attributes of properties, with a Cooks Distance filter for outliers. Indices are based on standard methods, holding the mix of characteristics constant, with the annual average of 2012 used as the base. Average sample sizes are 89,000 (sales listings) and 5,800 (sales transactions) and 10,000 (rental listings). For more on the methodology, please see Contact: media@daft.ie The data are based on actual asking prices of properties advertised on MyHome.ie with comparisons by quarter over the last eight years. Our main indices have been constructed with a widely-used regression technique which adjusts for change in the mixture of properties for sale in each quarter. Our method is designed to reflect price change independent of this variation in mix. Contact: angela@myhome.ie The prime residential market is defined as the top 5% of the residential market by market value. The index is constructed by a repeat valuation process which is undertaken on a quarterly basis from a basket currently containing thirty properties. Office take-up is defined as when contracts have been signed. The city centre encompasses all of Dublin 1 and Dublin 2, from Barrow Street in the east of Dublin 4 to Ballsbridge to the south and west along to Grand Parade in Dublin 6 and south to include Cuff Street in Dublin 8.Prime office rents are theoretical headline rent for prime office space let long-term to a grade A tenant and based on comparable letting evidence for that quarter allowing for normal incentives. The prime office investment yield is a theoretical value for which a prime office building let long-term to a Grade A tenant would sell for based on comparable investment activity for that quarter. 24

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