10/10/2013: CBRE Research Q3 2013: Dublin Offices Market & Irish Retail Market

Some good news from the Dublin Office Property markets and Irish Retail Property markets via CBRE Research Notes today. CBRE Research, as usual, provide very good insights and both notes, so quoting from the first note directly:

• 56 individual letting transactions signed during Q3 2013
• Almost 80% of Dublin office take-up in Q3 located in the city centre
• 68% of total lettings in the quarter smaller than 465m2 (5,000 sq. ft.)
• Prime rents expected to increase over coming months as the scarcity of prime office buildings in the city centre escalates
• Continued decline in vacancy rates in all districts
• Prime office yields have contracted by a full 150 basis points in the last 18 months
• Escalation in investment transactional activity over recent months
• Prime Dublin office yields contracted to 6% during Q3
• The city centre accounted for 79% of overall take-up in Dublin in Q3
• The Dublin 2/4 postcode accounted for almost 44% of letting activity in the city centre in the quarter
• The city centre vacancy rate was 15.7% at the end of the third quarter while the vacancy rate in Dublin 2/4 was 12.7%
• 8 office investment sales totalling € 73.65 million completed in Dublin during Q3
• Offices accounted for 30% of overall investment spend in the Irish market during the first nine months 2013

Some charts:

Less encouraging changes in the Retail Property sector. Again, via CBRE:

• An improvement in consumer trends in the first half of 2013 as the Irish economy shows some signs of improvement
• Some variation between the performance of different sectors of the retail market
• Considerable retail leasing and sales activity occurring in the property market
• Prime Zone A rents now showing signs of stabilisation following 60% fall from peak
• Little improvement in high street vacancy rates over the last six months with vacancy rates in provincial towns remaining stubbornly high
• €84 million invested in retail investment properties in the first half of 2013, accounting for 14% of investment activity in the period
• Prime retail yields have contracted since the beginning of the year in response to strong investor demand

And a couple of charts:

25/6/2013: Planning Permissions in Ireland: Q1 2013

The latest data on Planning Permissions was released by the CSO under a rather cheerful headline: "Dwelling units approved up 24.7% in Q1 2013" which prompted me to start writing a positive note. However, having updated the database, I could not believe my eyes. Not until the third bullet point in the release do you get the sense as to what is really going on in the sector - the fact confirmed by looking at CSO data, rather than reading the CSO release which focuses the top points of analysis on positive side of select sub-components of the overall sector performance. So here are the facts, as conveyed to us by the data itself.

In Q1 2013, total number of planning permissions granted in Ireland for all types of construction stood at 3,275, which is 1.35% down on Q4 2012. This marks de-acceleration of seasonally-driven 17.96% q/q decline recorded in Q4 2012. However, on an annual basis, allowing for some seasonality controls, overall number of planning permissions granted in Q1 2013 was down 2.76%, which contrasts against an annual increase recorded in Q4 2012 of 1.13%.

In summary, things are not going well at all. Q1 2013 marks an absolute historic low for any quarter since Q1 1975! That's right: we hit an absolute historic low in 37 years and CSO release says things are 'up' by focusing on sub-series before it reports in the text the actual aggregates.

In charts below, I marked current sub-period (since Q1 2010) low against historic low before the current crisis. Take a look.

Note: in Q1 2013,

• Total number of planning permissions hit a historic low (as mentioned above)
• Total number of permissions for dwellings stood at 862, the second lowest after the historic low of 832 hit in Q4 2012.
• Total number of permissions for 'other new construction ex-dwellings' stood at 785, which is above the historic low of 636, but still marks a decline q/q.
• Number of permissions for extensions hit a historic low.
• Number of Alterations, conversions, renovations etc hit a historic low. 

Again, I find little to cheer in the above...

4/4/2013: Irish Planning Permissions 2012 data

Per data released on March 22 by CSO, Irish Planning Permissions for Construction have continued to collapse in 2012. Full year data shows that:

• In 2012 total number of all types of planning permissions issued in the state stood at 14,407 - an all-time record low (with records starting in 1992), down 9.91% on 2011. 2010-2011 rate of contraction was 15.11% and 2009-2010 rate of decline was 27.64%, so naturally for such steep drops in previous years, the rate of annual declines is moderating. 
• From the pre-crisis peak, number of planning permissions is now down 76.90%
• Planning permissions for dwellings fell to 3,643 in 2012, down 23.58%, having fallen 24.89% in 2010-2011 and 38.85% in 2009-2010. Compared to peak, the permissions are down 86.76% to a new historical low.
• Planning permissions for other new construction rose in 2012 to 3,407 from 2,964 in 2011, a rate of increase of 14.95% y/y that follows declines of 7.52% in 2010-2011 and 29.01% in 2009-2010. Relative to peak, 2012 level of permissions for other new construction are down 82.4% against absolute minimum reached in 2011 when these were down 84.72% relative to peak.

In square footage terms, planning permissions issued

• Fell 21.56% y/y for all types of new construction (these are now down 86.67% on peak, hitting a new historical low);
• Fell 39.48% y/y for dwellings (these are now down 90.89% on peak, hitting a new historical low);
• Fell 7.44% y/y for other types of new construction (these are now down 86.78% on peak, hitting new historical low);
• Rose 0.52% for extensions (these are now down 68.87% on peak, having hit the bottom at -73.41% on the peak in 2011).

At certain point in time (soon, one assumes given the rates of decline on peak already delivered), a broom shed construction somewhere in West Meath will qualify as an uplift in the market....

14/03/2013: Irish Construction & Building Sector Activity 2012

Latest index for Irish Building and Construction Production volumes and value is out today, confirming what I wrote about on the foot of new planning permissions data (here), namely that Construction and Building sector continued to shrink in 2012 and there is little hope beyond some public spending projects uptick for the already devastated sector.

Top headline numbers for full year 2012 (these are imputed from Q1-Q4 2012 data):

• Value index for all production activity in Building and Construction sector declined from 25.9 in 2011 to 24.7 in 2012 (using base of 2005=100). This means all activity in value terms has hit another historical low for the series and is running at less than 1/2 of the level of activity in 2000 when the index was reading 53.5.
• 2012 was the sixth consecutive year of declines in the sector activity by value and volume. 
• Peak sector activity was registered in 2006 with index reading of 109.7, which implies a decline from peak through 2012 of 77.5% in value terms.
• Value sub-index for Building excluding Civil Engineering has dropped from 20.9 to 18.2 between 2011 and 2012 (decline of 12.8% y/y) and is down 83.2% on peak attained in 2006.
• Residential Building value sub-index is down to 8.6 in 2012 from 10.2 in 2011, marking a decline of 92% on peak (2006).
• Non-residential building sub-index for value is down to 55.2 from 61.7 in 2011 and is 53.9% below peak levels attained in 2008.
• Civil engineering value sub-index was up in 2012 to 66.0 from 58.6 in 2011 (+12.6% y/y) but is down 49.3% on peak attained back in 2007. 

Similar story is traceable across the volume of production indices.

Charts to illustrate (note, charts are referencing a different base - instead of 2005=100 these have been rebased to 2000=100 for more clear compounded effect illustration):

11/3/2013: Property tax and the markets for property investment

The Irish Government is about to bring in a property tax covering only residential property and excluding land holdings. This is the market for real estate investment that the Government is about to hammer even more:

All permissions for new residential construction are down 87.6% in 2012 (based on estimated full year figure using actual data through Q3 2012) relative to peak. The levels are so low, we are at a historical low now and 2012 was down on 2011. Declines in permissions were recorded every year since 2008. For dwellings - full houses - planning permissions are down whooping 91.8% in 2012 compared to peak attained back in 2005!

Overall planning permissions are down 77.5% on peak. Again, historical series low in 2012 (based on estimate):

This is the same Government that has attempted to 'revive' the property markets via various tax breaks in 2011-2012. Talking about 'policy consistency' then...