Despite the challenging economic and business environment, 2011 was a positive year for the Galway commercial property market, according to DTZ Sherry FitzGerald. While already having the lowest vacancy rate in the country, the Galway office market enjoyed three large successful transactions during the year.
Firstly, leading information technology company Hewlett-Packard, which this year celebrates 40 years of innovation and transformation in Galway, announced earlier in the year that it is seeking additional office accommodation in Galway. HP is proposing to lease a new purpose-built office block measuring up to 9,290sq m (100,000sq ft ), and the company has shortlisted a number of parties on a potential design and build project.
Secondly, Galway continues to attract the best international gaming companies. The last two transactions for large size office space within the Galway market were both to US gaming companies, namely ZeniMax Online Studios and Bioware, a division of Electronic Arts (EA ). Both companies acquired approximately 4,650sq m (50,000sq ft ). However, a shortage of available modern office buildings to provide this floor plate requirement resulted in both parties looking at manufacturing facilities which required retro-fitting to call centre/office accommodation.
This is a very interesting trend, particularly given current economic circumstances. If Galway continues to attract large IDA projects which are seeking accommodation in the region of 2,300 to 4,650sq m (25,000 to 50,000sq ft ), a distortion will begin to form in the local office market between existing stock and design and build projects in terms of rental and lease terms.
With regard to the activity in the industrial market, this remained weak during the second half of the year. Ongoing challenging economic conditions, along with a shortage of suitable accommodation, continue to hamper demand; with activity expected to remain subdued going into 2012.
The northeast region continues to be the preferred location accounting for 74 per cent of the space occupied during the 12 months to quarter three 2011. The remaining space was taken up in the northwest region. In addition, leasing remains the occupational preference among active tenants, unchanged from the previous quarter. All of the transactions over the past 12 months comprised lettings. This is coupled with a lack of industrial accommodation currently openly available on the market for sale.
In relation to the retail sector DTZ Sherry FitzGerald has noticed that a number of national and international tenants are still seeking modern units in Galway city centre, however there is limited availability. DTZ concluded the sale of a retail investment on Shop Street in the last quarter of 2011 which showed a yield of 8.5 per cent.
The company has witnessed a strong demand for trading entities over the last 12 months and has transacted a large number of same with competitive demand from a number of end users.
Budget 2012 has also proven to be very significant for the Galway property market. The combination of measures introduced, in particular the announcements in relation to commercial stamp duty, and the much anticipated clarity surrounding the Government’s intentions in relation to upward only rent reviews for existing leases, will level the playing field for the Galway investment market and allow potential investors to actively re-engage in the market.
Furthermore, the introduction of a capital gains tax incentive for property purchased between midnight Budget night and the end of 2013 is a very welcome incentive for potential investors wishing to take advantage of the significant value in the marketplace at present.
As such, the company anticipates uplift in investor activity in the commercial property market. The uncertainty, particularly in relation to upward only rent reviews, had led to a complete stagnation of investor activity. The initiatives introduced should allow a more normalised level of market activity to emerge. Furthermore, DTZ Sherry FitzGerald anticipates a continued demand for trading entities together with owner occupiers acquiring commercial property, albeit at good price levels.
DTZ Sherry FitzGerald has extensive experience in all areas of commercial property including acquisitions, disposals, valuations, rating, rent reviews, property management, asset management, and fixed charge receivership. The company’s key objective for 2012, even more prevalent in today’s market, is to maximise value and deliver results to match clients’ best expectations.
DTZ Sherry FitzGerald can be contacted at (091 ) 569181.