JLL review H1 market performance

In this article, we will delve into the key sectors, including capital markets, offices, industrial, retail, and hotels.

In capital markets, Senior Director, Niall Gunne anticipates that investment will pick up in H2 2024, “Transactions and bidder intensity are starting to pick up due to improved investor sentiment. The last two years have been a difficult environment for refinancing, grappling with the double-edged sword of lower real estate values coupled with elevated financing costs. However, some sectors in the property market are at or near the bottom, creating a ripe environment for investment. As a result, we expect a busy end to the year as allocators scramble to find suitable opportunities to place their capital, aiming to capitalize on the upward momentum and improved market conditions.”

The office sector, perhaps a sector that has been most impacted by the pandemic, is beginning to see green shoots. Rita Carney, Senior Director for Office agency is optimistic after Q2 2024, “It is encouraging to see take-up exceed 900,000 sq. ft for this quarter, which has only occurred in one other quarter (Q4 2021) since the onset of the pandemic. Average deal size has tripled quarter-on-quarter from 6,309 sq. ft to 18,530 sq. ft., as we see a return of larger HQ moves by corporates to new build accommodation. There is a healthy level of reserved stock with deals agreed which would suggest a likely take-up in the range of 2m sq. ft by the end of 2024.”

Senior Director for Tenant Rep, Fionnuala O’Buachalla, echoes this and adds, “In addition to large transactions, we are seeing the return of companies expanding their current offices – another positive feature. Whilst demand from the Tech sector has reduced, it is being replaced by the Finance sector. We are continuing to see an increasing flow of new companies located in Dublin predominately from the US. Previously this demand was satisfied in smaller flex offices. However, there is now a clear move towards traditional, more permanent offices.”

The industrial sector has had a sluggish first half, but prime rents remain strong. Director, Cathal Morley, noted that “there has been relatively limited transactional activity in H1 2024, as a lack of supply and a slowdown in demand have resulted in low take-up volumes. While market rents have grown in recent years, there are signs that we may be entering a consolidation period, and we would expect prime market rents to remain at broadly €13.00 – €13.50 per sq. ft. until the end of 2024.” Morley further notes that “Industrial developers remain concerned about increasing construction costs and while hard costs have been mitigated somewhat, soft costs show no signs of abating. Logistics facilities are increasingly becoming more sophisticated and coupled with the latest fire regulations, ESG, and sustainability standards, all have resulted in a higher base build cost which has necessitated higher rents to retain economic viability.”

In retail, Director, Nicola Vance, reports favourable market conditions in H1 2024, with high occupancy levels and stable rents. Vance highlighted that the high street remains a competitive market, “In Grafton Street, Zone A rents are currently priced at close to €500 per square foot, and the area is boasting a low vacancy rate of 3%. The appeal decision on the re-development of the Stephens Green Centre is eagerly awaited after the summer. JLL has successfully let all the units on the Ground Floor on a short-term basis and is currently dealing with enquiries for large space in the modern new centre.”

The Irish hotel market has experienced remarkable activity in 2024. With over €650 million in completed hotel transactions for the year, the market is poised for further growth. Daniel O’Connor, head of hotels and living, said, “Major demand drivers such as music concerts and sporting fixtures have contributed to this positive trend. Ongoing high-profile sales processes, including Dublin One Hotel and Mount Juliet Resort, indicate sustained interest in the sector. Despite the challenges posed by interest rates and construction costs, the hotel market exhibits resilience and is expected to perform well for the remainder of 2024.”

The Irish market at the halfway point of 2024 reflects a mixed performance across sectors. While the hotel sector thrives amid strong transactional activity, the remaining sectors are recovering. The tide began to turn in Q2 with strong investment and leasing volumes recorded, notably in offices. Investor and occupier sentiment will continue to improve in H2 2024, with the outlook for the Irish economy remaining largely optimistic, as labour markets remain tight, and the prospect of a second-rate cut is on the horizon before the end of the year.