The IRISH Commercial Property Market Overview

PREPARED FOR

THE IRISH COMMERCIAL PROPERTY MARKET OVERVIEW

Marie Hunt, CBREJune 20th 2013

2CBRE ANALYSIS | Office Availability & Vacancy Rates | May 2013

AGENDA

• The Occupier Markets− The Office Market− The Retail Market− The Industrial Market

• The Investment Market• The Hotels & Licensed Market• The Development Land Market• Loan Sales

Presentation to PRAI– June 2013


Growth in Dublin Office Stock THE OFFICE MARKET

Growth in Dublin Office Stock | 2004 - 2013

SOURCE: CBRE, Q1 2013

Presentation to PRAI – June 2013


Prime Rents | 56% Peak to Trough DeclineTHE OFFICE MARKET

Prime Dublin Office Rents | Q1 2000- Q1 2013




Take-Up vs. VacancyTHE OFFICE MARKET

Dublin Annual Office Take-Up vs. Vacancy | 2004 – Q1 2013




City Centre Office VacancyTHE OFFICE MARKET

Dublin City CBD Vacancy Rates | Q1 2013


Presentation PRAI – June 2013


CBRE PRIME RENT SERIES Peak June 2013 Trending Prime Rent Prime Rent € per sq m € per sq mRETAIL SHOPS Prime High Street Zone A 10,000 4,500 StableGood Secondary High Street Zone A 7,500 4,000 StablePrime Provincial High Street 4,500 3,500 WeakerSHOPPING CENTRES Prime Zone A 3,900 3,000 StableSecondary Zone A 2,800 2,000 WeakerRETAIL WAREHOUSES Prime 360 215 StableSecondary 320 80 WeakerOFFICES Prime City Centre Dublin 673 306.7 StrongerSecondary City Centre Dublin 377 194 StableSuburban Dublin 296 172 StablePrime Provincial 270 135 WeakerINDUSTRIAL Prime Dublin 130 60 StableSecondary Dublin 100 37 StablePrime Provincial 90 33 WeakerPresentation to PRAI – June 2013


THE OFFICE MARKET

Continued activity from existing occupiers and new entrants…

Overall level of demand robust…40 transactions signed in Q1…

Some rental growth emerging for prime although aggregate relatively stable…

Incentives starting to shrink…

Some improvement in the availability of funding ….

An increase in corporates buying premises…

An increase in refurbishment projects and pre-planning discussions although no speculative development anticipated for some time yet…

Continued gradual decline in the overall rate of vacancy…

Change of planning regime in Dublin Docklands…

Increased transparency due to new national database ?….

Presentation to NTMAPresentation to PRAI– June 2013


REGIONAL HIGH STREET VACANCY



THE RETAIL MARKET

Some improvement in this sector over recent months as consumer confidence starts to stabilise but conditions still challenging…

Vacancy levels a concern, particularly in provincial locations…

Good demand from existing retailers and new entrants although largely focussed on core locations….

Greater focus on developing multi-channel offerings as online sales escalate…

Competition for the best pitches intensifying due to lack of new accommodation coming on stream…

Potential for some limited rental growth in key locations although aggregate remaining relatively flat….

Rates now more topical than rents for many retailers…



THE INDUSTRIAL MARKET

Strong demand from a range of specialist occupiers, particularly for prime buildings…

Greater incidence of occupiers purchasing premises, instead of renting…

A number of significant land sales in negotiation …

No speculative development anticipated other than ‘design & build’…

Rental values beginning to stabilise…

Pricing not the key driver of location decisions…

Short lease terms the norm…..

Multi-channel retailing boosting the demand for logistics and distribution facilities…

Presentation to NTMAPresentation PRAI– June 2013


IRISH INVESTMENT SPEND 2006 – Q1 2013



INVESTMENT INTO IRELAND 2012Over €545m of transactions > €1m signed in 2012

35 transactions > €1m

Presentation to NTMAPresentation to PRAI – June 2013


ANALYSIS OF IRISH INVESTMENT SPEND Q1 2013



IRISH TOTAL RETURNS & CAPITAL GROWTH



CBRE IRELAND EQUIVALENT YIELD SERIES Peak June 2013 Trending Yield % Yield %RETAIL SHOPS Prime High Street 2.50 5.75 StrongerGood Secondary High Street 3.50 7.00 StrongerPrime Provincial High Street 3.25 8.00 StrongerSHOPPING CENTRES Prime 3.50 7.50 StrongerSecondary 4.25 9.50 StrongerRETAIL WAREHOUSES Prime 4.25 7.75 StrongerSecondary 5.00 11.00 StrongerOFFICES Prime City Centre Dublin 3.75 6.25 StrongerSecondary City Centre Dublin 4.25 7.75 StrongerSuburban Dublin 5.00 8.75 StrongerPrime Provincial 5.75 9.50 StrongerINDUSTRIAL Prime Dublin 4.75 8.75 StrongerSecondary Dublin 4.75 10.75 StrongerPrime Provincial 5.75 12.00 Stable Prime Yields refer to an equivalent yield for a prime (well specified, well-located and rack-rented) property let to a strong

tenant(s), on a lease with 10 years unexpired and open market rent reviews (upwards or downwards) Prime Provincial refers to Cork, Galway, Limerick and Waterford only.Presentation PRAI – June 2013


THE INVESTMENT MARKET

Continued strong international appetite for prime investment opportunities and portfolios…

Domestic investors dominant but mainly for secondary and provincial opportunities…

Primary attraction is re-pricing from peak and the relative attractiveness of yields…

IPD series moving back into positive territory…

New sources of funding from overseas boosting liquidity…

Continued polarisation …

Potential for prime yields to harden further due to the weight of money…

Potential for secondary yields to soften further…

More loan sales activity anticipated …



IRISH HOTEL SPEND 2006 - 2013



INVESTMENT IN HOTELS IRELAND 2012Over €146m of hotel sales in 2012 in 24 transactions



THE HOTELS & LICENSED MARKET

More hotel and pub properties coming to the market…

Demand from international buyers primarily focussed on Dublin…

Domestic buyers focussed on provincial opportunities…

An increase in pub properties going into receivership and ultimately being released for sale…

Increase in refurbishment projects …

2 new hotels opening in Dublin in 2013 but several hotel projects planned…

Demand focussed on properties in Dublin 1,2 and 4 and profitable hotels in Cork, Galway and Kilkenny…

Improvement in funding, both from domestic banks and overseas…

The Gathering 2013….



DEVELOPMENT LAND SALES 2008 – Q1 2013



THE DEVELOPMENT LAND MARKET

Continued volume of both greenfield and brownfield land coming to the market …

An increase in owner-occupier demand …

Demand primarily local although some international investors buying sites…

Demand particularly strong for sites priced below €500,000…

An increase in the number of license and joint venture transactions

Strongest demand for:

• Sites with planning for up to 50 houses in Dublin

• Sites in good locations that suit discount retailers

• Partially-complete residential developments in good locations

• Sites in Dublin city centre that could accommodate student housing

• Strategic sites that meet the requirements of corporate occupiers wanting to develop bespoke facilities



COMPLETED LOAN SALES IRELAND 2012 Vendor Date Name Buyer Loan €m Discount Location

Lloyds Jun 2012 Prince Kennedy Wilson &

Deutsche Bank

€360.0 83% Ireland

GE Capital Aug 2012 Pepper Home Loans

€600.0 60% Ireland

AIB Oct 2012 Kildare Lone Star €650.0 60% Ireland (90%) & UK

(10%)

Lloyds Nov 2012 Pittsburgh CarVal €380.0 75% Ireland

Lloyds Nov 2012 Lane Apollo €1,800.0 90% Ireland



2012 GLOBAL LOAN SALES COMPLETED37% of €9.79bn (Original Loan Value) in 2012 comprised Irish assets

Approximately €836 million paid for Irish Loans in 2012



LOAN SALES IRELAND 2013 Vendor Date Name Buyer Loan €m Discount Location

NAMA May 2013 Aspen Starwood Capital/Catalyst

Capital/Key Capital

Consortium (80%) & NAMA (20%)

€800 m c.75% Ireland

NAMA 2013 Club

Lloyds 2013 ?

NAMA/IBRC 2013 Delta

?

Presentation to PRAI – June 2013Presentation to PRAI – June 2013

Stages of a Property Market Cycle

Source | Homer Hoyt – 100 Years of Land Values in Chicago


QUESTIONS?

Marie HuntExecutive Director, CBRETel + 353 1 618 5543

Email [email protected]

Presentation to NTMAPresentation to PRAI – June 2013Presentation to PRAI – June 2013

mailto:[email protected]

The IRISH Commercial Property Market Overview

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