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Investor interest in Irish commercial property remains strong, despite COVID challenges

Kevin Donohue • 15/01/2021

Despite COVID-19 challenges, the final three months of the year witnessed a strong close to 2020 for the Irish investment market. According to the latest research by Cushman & Wakefield, a total of €861m transacted in Irish commercial property in the final quarter, bringing the year-end total to just over €2bn.

 

Although down on recent years, this volume sits above the long run average of €1.7bn and is akin to 2013 levels both in terms of value and volume. 

 

Commenting on the market, Kevin Donohue, Head of Capital Markets Ireland, Cushman & Wakefield noted;

Overall, 2020 has reinforced Ireland’s credentials as a stable investment location in the commercial property market. We have seen continued investment into the market from both domestic and overseas investors and the market is abound with liquidity. The pandemic has given investors time to reflect and one of the main outcomes is that the social environment, sustainability and green credentials have come to the forefront in investment criteria.  This theme will continue into 2021 and those investors willing to adapt will reap the rewards.”

 

Offices and residential accounted for the largest share of investor interest for a third year running. Despite the pandemic posing questions around the future of the workplace, office assets accounted for approximately €1.15bn or 57% of turnover in 2020. Notable Dublin office transactions in the final quarter include the sale of 28 Fitzwilliam to French investment manager Amundi Real Estate for a price in excess of €177m, and German based Deka Immobilien acquisition of Baggot Plaza for €141m.

 

Investment in residential assets with an income attached, totaled €273m or 14% of turnover in 2020. However, this figure masks the true strength of demand for residential assets. It is worth noting there was an additional €904m of forward commitments which also took place.

 

Lastly, 2020 and COVID-19 also pushed the logistics sector into the spotlight, with the largest transaction of the year acting as a symbol for this. The largest transaction of quarter four and indeed the year, was Morgan Stanley’s sale of their equity position in a portfolio of Irish logistics assets. The Exeter Group Portfolio was acquired by Singapore’s GIC for €200m and was secured for a yield in the region of 4.50%. The portfolio consists of over 30 assets including units in Dublin business parks such as Greenogue and Baldonnell.

As the new year commences, many of the trends evident in the past 12 months look set to continue such as the robust investor demand for core office, PRS and industrial/logistic assets. In addition to this, market insight points to a growing demand for green and sustainable assets.

Kate English, Chief Economist, Head of Ireland Research & Insights, Cushman & Wakefield added:

“Although there is no avoiding the sudden economic and occupier uncertainty which has unfolded from COVID-19, there is also no denying the need for capital deployment by investors. The present interest rate and bond yield environment make property an attractive investment and therefore despite a challenging start to the year for some elements of the occupier market, yield compression is evident. Prime yields for Dublin offices and logistics are forecast to move further in 2021, however remain above some of the core European markets.”

 

 

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