Irish investors come back as commuter belt heats up again
IRISH investors have begun investing in commercial property in large numbers in the latest sign of a recovery in the commercial market sector.
Since the market began to pick up again last year, it has been the big overseas players that have taken the headlines in the investment market, with US private equity funds in particular buying into the top level property market in and around Dublin.
However, smaller Irish investors have also returned to the market now.
Speaking at a property round table event in Dublin, ExtraSales managing director Colin Horan told the crowd that there was a growing appetite to be found among domestic investors.
"There is a perception at the moment that the big funds have bought every shop and apartment in the country and everyone is now paying their rent to someone from another part of the world.
"In reality, though, they only have a tiny part of the overall market," he said.
Mr Horan's words were echoed by Allsop Space's Robert Hoban, who said that the number of overseas bidders at Allsop's huge auctions had grown, but he added that they were now being squeezed out by indigenous buyers.
"When we started running our auctions a few years ago, there were 50 or so bidders from overseas," he said.
"That number has now doubled to about 100. However, at the same time, the percentage of our properties that are being sold to buyers from outside Ireland has dropped from about 20pc to less than 6pc.
"That change has come mainly because Irish investors are coming back in their droves now.
"For obvious reasons, they probably have not been in a position to invest up to now, but that is changing and there is some cash available for investment among Irish people again.
"Now, clearly they aren't investing on the same scale as the Blackstones and Kennedy Wilsons, but long term it is those small investors who will sustain the market after those guys have moved on", he added.
One trend that has started to re-emerge, according to AIB's head of mortgages Jim O'Keeffe and Liam O'Connor of Irish Mortgages Corporation, is the return of non-cash buyers to the property investment market.
"That is something that hasn't been seen for a number of years," said Mr O'Connor.
Despite these improvements, there is still a considerable way to go in the market, and the perceived "three tier" sector between south Dublin, the rest of Dublin, and the rest of the country, cannot be overestimated, said Mr Hoban, adding that is being accurately reflected in the state of the residential market.
"The problem is, there are only certain locations that can guarantee what you want," he added.
"House prices have recently dropped, but the cost of building hasn't, so it really only makes sense to build in certain areas of the country, and by definition that means certain areas of Dublin.
"There are some new home developments coming to market all right, but it is very, very limited.
"You can't overestimate the three-tier market. Anything commercial that comes to market in the cities will sell, and you can be very brave with your pricing as a seller.
"Otherwise, it is very tough to sell unless you are willing to take a 15-20pc hit."
For investors now in search of yield, it is the counties around Dublin that are offering attractive numbers, said Mr Horan. That only tells half the story, however.
"The real value is outside Dublin, and, from an investment point of view, it is the commuter belt," he said.
"That is not the same commuter belt of six or seven years ago. It is the traditional commuter belt – towns within maybe 45 minutes of Dublin. The likes of Meath, Louth, Wicklow are the places that are attractive now.
"Somewhere way outside Dublin, in Cavan or somewhere like that, is no longer the attraction it was in the last decade.
"Things have reset and it is very much the traditional dormitory towns that are back in vogue," Mr Horan added.
Sunday Indo Business