Market bounces back as investors charge in
Published 28/11/2012 | 05:00
THE COUNTRY'S TOP agents say the commercial property investment market is on track to rebound this year with as much as €650m of property expected to change hands – a huge jump on the paltry €200m sold last year.
Overseas investors are leading the charge as they beging to cherry pick prime office and retail properties.
And these figures do not include other commercial properties such as hotels, pubs and development land sales, which are not usually included in investment figures and could add a further €150m to commercial transactions.
Both Sean O'Brien of CB Richard Ellis and Duncan Lyster of Lisney estimate that €600m of commercial investment property will have changed hands before the end of the year.
Domhnaill O'Sullivan of Savills believes the figure could be even higher than €650m.
Last year's €200m. low point was blamed on uncertainty over rent reviews, the economy and the euro. This year, in contrast, a series of government measures including a clear signal on rent reviews, fiscal discipline, cuts in stamp duty and a capital gains tax holiday for investors, have helped to re-activate investor interest.
Another factor boosting the investment activity has been the number of international funds that have begun to purchase apartment blocks in sought after locations.
In the past such activity was usually undertaken by individual buy-to-let investors but now that professional funds have become active, the commercial estate agents have begun to regard these deals as part of their market sphere.
The largest of these was the purchase by Kennedy Wilson of the 210 unit Alliance Building in Dublin 4 for around €40m followed by the purchase of the 119 unit Sandford Lodge, in Ranelagh, Dublin 6 for €26m.
Duncan Lyster says the deals indicate that net returns may be as keen as 6pc.
Kennedy Wilson has also led the charge in office investments.
The most notable office being its purchase of the State Street Bank office building at Sir John Rogerson Quay which is believed to have sold for around €108m.
Both of those properties were marketed through Savills.
Other major purchases include four blocks of offices at AIB Bankcentre, Ballsbridge for just over €70m reflecting a yield of €9.6m.
On the retail side, The Edward Square Shopping centre in Galway was sold for around €27m reflecting a yield of 8.7pc.
With a number of other office block sales in the pipeline observers will be hoping that sales could get closer to €700m.
Pending deals include the Bishop Square offices in Kevin Street, a former Bank of Ireland head office in Baggott Street, Dublin 2 and a Grand Canal Square office block with a €75m price tag.