Monday 25 March 2019

Commercial property tipped to bounce back

Long-term and overseas investors are fuelling demand

Westend Retail Park in Blanchardstown which was bought by DWS in €147.7m deal Photo: Peter Moloney
Westend Retail Park in Blanchardstown which was bought by DWS in €147.7m deal Photo: Peter Moloney
Donal Buckley

Donal Buckley

Values and rents for all sectors of the commercial property market are expected to resume their growth in the second half of this year after pausing for a breather during the last five months, according to new research.

Following completion of almost €1bn of investment transactions in the first quarter of 2018, activity has continued at pace over recent months although the second quarter is not showing the same level of deals as the first quarter, says the latest CBRE bi-monthly market report which is published today.

The Sharp Building
The Sharp Building

Nevertheless, there are several sizeable assets being marketed at present which will boost transactional activity further in the third and fourth quarters of this year and this looks set to be boosted by further Asian investment.

Investors from a range of jurisdictions continue to be attracted by Irish opportunities underpinned "by buoyant economic fundamentals and the relative strength of occupier market activity as well as comparatively attractive pricing," says Marie Hunt, executive director at CBRE Ireland.

The private residential rental sector (PRS) has dominated the investment market, accounting for the top four deals - with a combined value of €436m - in the last two months.

These include: Kennedy Wilson's purchase of 274 apartments and a 3.97 acre site at The Grange in south Dublin for €160m; Irish Life's acquisition of 262 apartments from Park Developments at Fernbank, Churchtown, Dublin 14 for €138.5m; Carysfort Capital's deal to buy the 120 unit Six Hanover Quay development from Cairns for €101m and IRES Reit's acquisition of the 128 apartment Hampton Wood scheme in Finglas, Dublin 11 for €40m.

Indeed, the value of PRS activity was even greater as the above list does not include AXA Investment Managers - Real Asset' purchase of a 50pc share for an undisclosed amount in a joint venture with Kennedy Wilson.

The new JV will initially hold 1,173 dwellings in three Dublin sites which were owned by Kennedy Wilson. If those units were valued at the €800,000 per apartment achieved at Six Hanover Quay, that suggests that KW may have received more than €450m for its half share.

Meanwhile, Independent House and Brett Court, Talbot Street and Foley Street, Dublin 1 sold for more than the €24m guide price quoted by CBRE. Receiver Ken Tyrrell of PwC sold the lot to a European family investment fund.

This deal comprised offices let to Independent News and Media as well as an adjoining supermarket and 10 apartments.

Other big recent deals include a retail warehouse scheme and offices at Westend Retail Park in Blanchardstown, bought by DWS for €147.7m.

CBRE reckons that the PRS sector has been the only sector to record stronger yields in the last two months as its yields strengthened from 4.25pc to 4pc.

This indicates they are as valuable as prime Dublin offices and super prime shopping centres. Most of this demand is coming from long-term investors.

"The volume of capital chasing residential investment opportunities in Ireland's main cities continues to escalate with several investors who heretofore focused primarily on traditional investment sectors such as offices and retail now also willing to consider investment opportunities in the residential sector," Hunt says.

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