Key findings from the 2024 Commercial Property Review & Outlook:
- Half of Chartered Surveyors expect prime office capital values to decline by up to 10% in 2024
- 73% of surveyors forecast that prime industrial rental values will either remain the same or increase by 5% in 2024
- 43% of those surveyed anticipate that prime retail capital values will remain unchanged in 2024 while 34% believe values will decline by up to 10%
- Just under half of respondents expect prime retail rents to remain unchanged this year
- 66% reported a deterioration in general credit conditions in Q4 2023
Thursday 22nd February 2024: Half of chartered surveyors expect prime office capital values to decline by up to 10% in 2024 while a further 10% believe values will fall by an even bigger margin a new survey has found.
The figures for prime industrial property paint a very different picture with 42% saying they believe capital values will remain the same and 41% saying they will rise. On the retail front, 43% of chartered surveyors anticipate that prime retail capital values will remain unchanged this year while just over a third, (34%) expect values to decline by up to 10%.
These were among the key findings of the Society of Chartered Surveyors Ireland’s Annual Commercial Property Review and Outlook Report 2024 which tracks occupier and investment sentiment across the three main commercial property types, office, retail and industrial.
The findings on value were mirrored to a high degree with regard to rents. For example, while 31% expect prime office rents to remain unchanged, 20% expect them to fall by between 0 and 5% while a further 23% expect them to fall by more. Just as with capital values, prime industrial property is once again expected to have the highest increase in rental values this year. While 31% believe rents will remain unchanged, 42% believe rents will increase by between 0 to 5% with another 18% believing they will rise further.
In retail, a much more nuanced picture emerges with just under half (49%) expecting prime retail rents to remain unchanged, 27% believe they will rise and 25% expect them to fall.
Commentary
The Chair of the SCSI’s Commercial Agency Committee, Arlene Maguire, said it was clear the overall outlook for the commercial property market remained very challenging.
“Our report found that six out of ten chartered surveyors believe the commercial property cycle is in either an early or mid-downturn phase while 18% said they believed it had reached its bottom point.”
“Sixty-six per-cent of respondents reported a deterioration in general credit conditions in Q4 2023 and while this was down slightly on last year, it demonstrates the difficult conditions of the current market which are being driven by multiple changes in interest rates by the ECB and a growing preference among Irish banks to lend for building with better ESG compliance.”
“The general decline in demand for office space can be attributed to hybrid working policies, uncertainty over the future direction of companies’ working policies and the growing demand for sustainable buildings. Not surprisingly 50% of respondents to our survey reported an increase in the level of inducements being provided to complete transactions in this sector. This compares to 24% in retail and just 4% in industrial.”
“While prime grade A properties continue to attract moderate demand, second-generation stock will be more difficult to transact, especially considering the upcoming introduction of new economic, social and governance (ESG) regulations. We believe the continued emphasis on sustainability through such measures as the EU’s Energy Efficiency Directive is reshaping the priorities of both investors and tenants into the future.”
“The retail sector is predicted to experience a new influx of retailers re-entering the market after post-Covid reductions in some rents. While the demand for prime retail space is relatively strong it is unlikely that any new shopping centres will be built across the country. Therefore, the supply of prime high street and shopping centre units will need to come from existing stock.”
“While sentiment regarding investment in all three sectors remains firmly negative, retail, which was severely impacted by Covid restrictions, is improving, with higher expectations in the industry that tourism numbers will be up, and the hospitality sector will enjoy strong growth into 2024.”
For media queries please call the SCSI at (01) 6445500 and ask for Patrick King.
About the SCSI and Survey
The Commercial Property Market Monitor Review and Outlook Report 2024 is informed by three surveys completed during 2023 by Chartered Commercial and Valuation Surveyors. A total of 326 responses informed the 2023 data within this report.