Commercial property market softens as Ulster Bank steps up branch sales

The two, the impressive c 5,000 sq ft No 88 St Patrick’s Street by the former Moderne and stalwart traders TW Murray & Co, and the 4,000 sq ft No 17 Winthrop Street, are to be offered via Cushman & Wakefield in coming weeks, with advance notice just circulated to targeted investors this month.

No price details or lease/freehold descriptions are yet revealed by the agents, who are also handling 116 Main Street, Mallow — a 4,000 sq ft building, listed as “reserved” on their prospectus — and C&W will also offer the lease on Midleton’s No 95 Main Street.

They are among 39 former Ulster Bank branches being disposed of, in three tranches, from May to September. Also being sold in Munster are 95 O’Connell Street in Limerick, 97/98 Custom House Quay in Waterford City, No 37 Grattan Street in Dungarvan, and a branch at Kickham Street, Nenagh, Co Tipperary.

In Cork city centre, the imminent arrivals of No 88 St Patrick Street and 17 Winthrop Street come as the off-market disposal of the nearby 83-85 St Patrick’s Street — now occupied by Dubray Books — feature in the recently released Lisney Q2 Commercial Market report.

Lisney cites this deal at €2m (and at a net initial yield of 7.5%) as the largest investment purchase of the quarter in the southern capital, along with €785,000 paid for floor 4A of a car park at Union Quay at a net initial yield of 4.8%.

These two deals — the only ones reported for the quarter by Lisney — accounted for just 0.8% of the national investment spend, while it says that as calculated of the end of June 2023, there was just over €45m worth of on-market investment opportunities available in Cork, which included units at Opera Lane, between St Patrick’s Street and Emmet Place with a guide price of €26.75m.

However, it notes that “given the amount of activity occurring off-market in recent times, this supply figure (of c €45m) is likely higher”. The Q2 Lisney report adds that nationally “yields are generally softening across all [commercial real estate] sectors in Ireland. However, in Cork, we estimate that the prime office yield remained static at 6.75% at the end of June for the second consecutive quarter, having been at 6.5% at the end of 2022. And, in contrast to the nationwide market, the prime retail yield in Cork contracted by 25 basis points in the quarter to stand at 7.5%.”

Meanwhile, aligning with the report of low transaction levels generally this year to date, a Sherry Fitzgerald commercial market overview for H1 2023 also notes that rising interest rates continue to impact on investment activity with turnover for Q2 “falling to one of the lowest quarterly levels on record at €333 million”, adding that volume of transactions was also low with only 26 reportedly closing during the three-month period.

Sherry FitzGerald said the retail sector had emerged as the most significant component of investor activity during the quarter accounting for 37% of activity, reflecting a number of retail parks and retail warehouses that traded during the period, while office asset investment “remained subdued during the three-month period representing a 12% share of overall capital spend or €39m. Dublin accounted for 69% of the figure, while Galway and Cork absorbed 4% and 3% respectively”. International investors accounted for 53% of capital invested in the first half of the year, said Sherry Fitzgerald.

Heading the take-up round-up of office space in Cork so far this year were the reports from Savills and Lisney both noting the leasing of 64,000 sq ft of offices at Westfield Office Quarter in Ballincollig, developed by O’Flynn Group, which had been vacant since 2019, as well as the acquisition of 35,200 sq ft at Building 4, University Technology Centre by the HSE. Public sector expansion “played a major role, contributing to 56% of the deals in H1,” said Savills, who commented that office headline rents “maintained stability at €32.50/sq ft, reflecting the consistent market trend over the last three years.”

Total stock broke the 7 million sq ft mark, with 3 million sq ft in the pipeline vacancy rate for H1 2023 stood at 13.7%, down slightly from 14.3% in H1 2022 “attributed to factors such as the pandemic’s effect on transactional activity and the delivery of new office stock.”

Sheila Madden of Savills said: “The resilience of Cork’s office market is truly commendable, especially given the global challenges we’ve faced in recent years. The current trends, emphasising health, wellbeing, and sustainability, underline the evolving priorities of tenants. The dominance of the public sector, combined with the emphasis on energy efficiency and sustainability, showcase the maturity and future-readiness of the market. The consistent take-up, rental stability, and anticipated growth paint a positive picture for Cork as a competitive office hub.”