Investment in Irish commercial property surpasses €2.4bn in the year to September 2019
Commenting on the market, Jonathan Hillyer, Director, Investments, Cushman & Wakefield noted;
“Following the ECB’s cut to interest rates at the end of September, and signals that further rate cuts have not been ruled out, real estate returns continue to look attractive to fund managers across Europe, with Dublin remaining as a key city. Lack of available investment opportunities across the continent remains a constraint in the marketplace which should see continued robust pricing at least in the short term.”
After a robust first half of the year, the third quarter recorded turnover levels in excess of €786m across thirty-three deals. The most notable transaction of the third quarter was the prime office block, located in the heart of the CBD (Central Business District) of Five Hanover Quay, Dublin 2. The German fund manager, Union Investment, acquired the dockland office block for €197m. The property is fully let, generating an annual rental income of approximately €8.8m.
Second to this in the quarter, was the purchase of the Nova Atria office campus in Sandyford, Dublin 18. Singapore based real estate investment manager, Mapletree Investments, secured the office block for €165m from US private equity titan, Blackstone.
Interestingly, the third quarter witnessed a switch up in the asset class rankings with office transactions returning to the top of the table ahead of residential transactions. In line with previous trends recorded over the past two years, office assets accounting for approximately €989.4m or 41% of total turnover in the nine months to September 2019.
Nonetheless, residential assets remained a very active feature in the Irish investment market, totaling €638.2m in the year to date. The top transaction in the quarter included a portfolio of classic residential properties in suburban Dublin labelled The Circle Collection. The portfolio was acquired by US investment manager, Heitman Capital Partners, for €52m and comprises twenty-seven pre-63 properties.
Perhaps the true strength of demand for residential assets is most evident in the large value of forward purchases to have taken place in the year to date. Notable forward commit transactions include, Dublin Landings purchased by Greystar for €175.5m, while Urbeo secured The Quarter at Citywest for €94m. Such transactions drive the total sum of forward commits in the private rented sector to approximately €697.6m in the nine months to the end of September. It must be noted, that such deals are not included in Cushman & Wakefield’s analysis as they fall outside the traditional definition of investment activity but do further illustrate the demand for residential assets in the market over the past nine months.
Dublin continues to attract both the largest value and volume of investor interest, accounting for €1.9bn across seventy-four deals. Outside of Dublin, Cork captured 6% of total capital invested in the year to date, approximately €151m.
Of interest, as the final quarter of the year commences, is the origin of the capital spent in the Irish investment market. Funds sourced from a domestic investor represented 41% of total turnover in 2019 to date, while foreign capital stood at 54% during the same period. A strong representation of domestic investors in the marketplace bodes well as an indicator of the current Irish economic climate, despite the glooming uncertainty of Brexit.
After a robust nine months, the investment market is anticipated to continue to perform strongly as the closing three months of the year advance. In the face of Budget 2020, where commercial stamp duty was increased by 1.5% to 7.5%, persistent investor interest and strong levels of sentiment, lead to expectations of approximately €3bn worth of turnover transacting in the year. When incorporating in nontraditional investment transactions, gross capital flows in the entire market has the potential to exceed €5.5bn if corporate sales, such as Green REIT, and PRS transactions were to be included.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.ie or follow @CushWakeIRL on Twitter.
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