Attributed to changing consumer appetites and habits, challenging trading conditions and the rise of hybrid working, the rate of vacancies in Galway's commercial properties has risen in the last twelve months to become the second highest in Ireland.
With almost one in five commercial buildings vacant in across the county, the sight of empty units in towns across Ireland are becoming the new norm. But, how did this happen? and what does the future hold for the local commercial market?
Nationally, the rate of commercial vacancy has increased in 20 out of the 26 counties since December 2022, continuing a 'trend of more than half of the country experiencing an increase for the fifth year in a row'.
Describing Ireland’s commercial vacancy rate as having 'surged to unprecedented levels', address database management company, GeoDirectory have warned that the rise could signal 'a challenging landscape for businesses', despite this, property experts across Ireland are projecting estimating positive turning points for the commercial market, potentially marking a new era for the industry.
Figures for Galway at first glance
With 20 out of 26 counties experiencing an increase in commercial vacancies, Sligo at 20.5 per cent, was the county with the highest commercial vacancy rate, followed by Galway at 18. per cent and Donegal at 18.2 per cent.
Within Galway, Tuam has the highest rate of commercial vacancy recorded. In 2023, 412 premises, the equivalent of 26 per cent of Tuam's commercial properties, lay empty, earning Tuam the title of 'third emptiest town in Connacht', preceded only by Boyle and Sligo town.
In Galway city, 19.5 per cent of commercial addresses are vacant. The town with the lowest rate of vacancy in Galway in 2023 was Loughrea, despite still recording a high proportion of empty commercial properties at 18 per cent.
All five counties in Connacht reported commercial vacancy rates above the national vacancy rate, with Boyle in Co Roscommon having the highest vacancy rate at 27.6 per cent amongst the selected towns in the region.
With 'services' making up 49.3 per cent of commercial businesses, nearly half of County Galway's business addresses fall within the category. Of that 49.3 per cent, 21 per cent of vacant addresses are linked to retail, 11 per cent linked to health, with the remainder in construction, industry, education, finance and public administration.
Positive outlook for Galway's offices
While empty offices have fast become a cause for concern in Dublin, the office and industrial market sector performances in Galway by the end of Q3 in 2023 has been comparatively positive, even seeing a reduction in vacancy levels. In addition to a decrease in vacancy, the cost of office rents in Galway reported an increase by the third quarter of 2023, standing at €301 per square metre (PSM ), up from €290 for existing stock in 2022. Rents for new builds also showed an increase, going from €375 psm to €431 psm.
According to property experts, Cushman & Wakefield, the first nine months of 2023 saw '18,300 square meters of space taken-up' in 17 deals. Describing the activity from June to September 2023 as 'brisk', with 5,000 square metres of space in the city and suburbs taken-up from eight transactions. Over a 'rolling 12-month basis', Cushman & Wakefield reported a total take up of 20,150 square metres, making it a 'very solid performance historically speaking'.
Importance of energy ratings in the market
In September 2023, Cushman & Wakefield outlined that occupiers had 'continued to seek Grade A or Leadership in Energy and Environmental Design (LEED ) accredited spaces' which 'increasingly align with Environmental, Social and Governance (ESG ) credentials and corporate governance requirements'.
During the same period, the organisation reported that 24 per cent of Galway's available office space was 'rated B3 or higher, approximately half of available space was rated C or D, and 27 per cent was rated lower than D or exempt.'
According to Deloitte's 2024 Irish Real Estate Outlook, the emphasis on energy efficiency is one that is projected to grow, with 'obsolete stock, or the potential for obsolete stock', featuring 'heavily in discussions as the market tilts further towards energy efficient buildings'. Approximately 89 per cent of office stock in Ireland has a BER certificate of C or lower. As a result, Deloitte explains that the 'capital values for older, poorer energy rated buildings have recorded greater declines and are anticipated to continue to do so'.
Changing face of the city
With the largest figures of vacancies in Galway's commercial market being retail, the changing dynamic of the sector in the city could play a major part in ushering in a new era for shopping.
In response to the newly released Society of Chartered Surveyors Ireland's (SCSI ) 'Commercial Property Review & Outlook Report' for 2024, Chair of the SCSI’s Commercial Agency Committee, Arlene Maguire, outlined a challenging year for the nation's commercial market, but a positive burst for the retail sector.
“The retail sector is predicted to experience a new influx of retailers re-entering the market after post-Covid reductions in some rents. While the demand for prime retail space is relatively strong it is unlikely that any new shopping centres will be built across the country. Therefore, the supply of prime high street and shopping centre units will need to come from existing stock.”
With the former Treasure Chest premises, and Una Taaffe's former retail premises, both currently on the market and a number of large, prime spots sitting vacant across the city, there is a plethora of 'existing stock' just waiting in Galway.
