Businesses face rent hikes this year as commercial property continues to recover, valuers predict in a report due out on Thursday.
Surveyors believe that factory and office values will increase in 2025 as demand for space grows on the back of strong economy, aided by falling interest rates.
The news means business tenants face likely rent hikes this year, according to the Society of Chartered Surveyors of Ireland (SCSI).
Increases are likely across the board, says a report that the society is due to publish on Thursday.
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However, tenants of prime industrial properties, such as factories and warehouses, could be hit hardest, with their rent bills expected to rise by 3 per cent this year, while value of the buildings they occupy could jump by the same amount, surveyors calculate.
Prime office rents and values could grow by 1.4 per cent, forecasts the society’s Commercial Property and Review Outlook 2025, which is based on a survey of members.
Shopkeepers could pay 1.2 per cent extra rent, the report finds, while prime retail property values will grow by 1 per cent.
Neil McDonnell, chief executive of business group, the Irish Small and Medium-sized Enterprise association (ISME), cautioned that the surveyors were predicting increased rents at a time when organisations faced other extra costs, including auto-pension enrolment.
“It’s going to be very unpleasant on the small business side,” he warned.
Mr McDonnell added that the surveyors’ rent increase predictions came to pass, they would add to members’ cost burdens.
He noted that many ISME members in service industries were on short leases with landlords demanding increased rents every time they renewed.
Small businesses account for the bulk of jobs in the Republic.
The SCSI report points out that commercial property has suffered mixed fortunes so far this decade.
Following a recovery from a slump during the pandemic, demand for space from businesses slid again in 2022 as the fallout from the Ukraine war stalled investment.
Values and rents began to rebound from that in late 2023, which continued last year as interest rates came down.
Prime industrial, office and retail rents properties enjoyed the strongest growth in rents and values, the SCSI report shows.
Many of those questioned for the report say that the commercial property market is at the beginning of a revival.
However, there is still a “high level of uncertainty” in the Irish commercial property market, according to society members, who say the threat of tariffs could upset current trends.
They say there is demand for space in urban areas and for buildings that meet high environmental standards.
Consequently, surveyors say owners of older offices also face the prospect of selling their properties at a discount or spending cash on refitting them to meet new environmental standards.
Commenting on the report, Arlene Maguire, chairwoman of the SCSI’s commercial agency group, noted that the last few years had been challenging for the Irish market.
“But these findings reflect a renewed optimism among chartered surveyors in the sector’s resilience and that is very heartening to see,” she added.
Confidence in the Republic’s economy had helped stabilise the market, Ms Maguire said.
She pointed out that lower interest rates had played a role too, with close to half the society members questioned for the report saying that credit conditions had improved slightly or significantly.
