Tuesday 17 September 2019

BNP Paribas: Dublin office market is following European 'mega deal' trend

Mega deal: Heuston South Quarter in Dublin 8 was sold to CK Hutchison Holdings for €175m
Mega deal: Heuston South Quarter in Dublin 8 was sold to CK Hutchison Holdings for €175m
Ronald Quinlan

Ronald Quinlan

New research from BNP Paribas Real Estate shows that some €265.2bn was invested in commercial property across Europe in the third quarter of 2018 on a rolling year basis. The figure represents an increase of 2pc compared with the same period in 2017.

The office sector accounted for 54pc of total investment volumes, increasing to €114bn, or by 3pc relative to last year.

Kate Ryan, head of research at BNP Paribas Real Estate Ireland said the strong performance of the European office sector was being replicated in the Irish market, where offices have accounted for 43pc of total investment turnover during the same period.

BNP Paribas's research notes the growth in the number of 'mega deals' (€100m+). In the three months to the end of September, their share of total investment volume rose to 44pc, compared with 43pc last year. A total of €115.7bn mega deals were transacted across Europe in the third quarter of this year.

Kate Ryan said: "We are seeing a similar trend towards larger lot sizes in the Irish market with nine deals worth over €100m transacting so far in 2018 compared with just four in 2017."

The most valuable transaction to date this year in Ireland was the BNP Paribas Real Estate-brokered sale by US fund Northwood Investment Corporation of Heuston South Quarter (HSQ) in Dublin 8 to CK Hutchison Holdings. The €175m off-market transaction was closely followed in terms of value by the sale of Ballymore and Oxley's No 1 Dublin Landings to German institutional investor Triuva for €164m and an off-market office swap deal between IPUT and State Street for €160m.

According to BNP Paribas's research, prime office yields in Dublin now stand at 4pc having declined by 25 basis points year-on-year. While this is low relative to previous years, the report notes the contrast between yields in Dublin and other European cities. In London prime yields have stabilised at 3.5pc, while Paris saw a decline of five basis points annually to bring prime yields down as low as 3pc. Yields in Berlin meanwhile have fallen as low as 2.9pc.

Kenneth Rouse, managing director at BNP Paribas Real Estate says: "With the prime office yield stabilised at 4pc, Dublin as a European capital still displays a strong degree of relative value across its cohort of peers and remains a strong proposition for international investors".

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