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Friday 17 January 2020

Cuckoo funds accounted for 1 in 3 commercial property deals last year

Extra space: Cumberland Place is due to complete this year
Extra space: Cumberland Place is due to complete this year
Ellie Donnelly

Ellie Donnelly

The growing institutional market for investing in the private rental sector accounted for one in three commercial property investments in 2019, according to a report from CBRE.

This market is becoming increasingly popular for institutional investors - dubbed 'cuckoo' funds - which are rapidly changing the housing market by buying or building entire blocks of accommodation to be rented long-term.

Investors are encouraged by the "attractive" returns here. Residential investment is also effectively exempt from commercial property stamp duty.

Marie Hunt, director and head of research at CBRE, said the sector would "continue to be significant", and the pattern here is being seen elsewhere in Europe.

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The increased funding going into this space is happening "all over Europe, as part of a trend towards increasing urbanisation", she said.

In its Outlook 2020 report, CBRE warned that any form of rent control here could dampen investor appetite, potentially hitting supply.

Over the next 12 months, the area will continue to attract demand from Irish investors, alongside a greater number of European funds, as well as some Asian capital, the report found. Overall, last year saw record investment volumes of over €7.2bn in Irish real estate.

The figures were boosted by the €1.34bn sale of Green Reit.

CBRE expects investment in the market this year to be somewhat lower. "Last year saw 18 transactions higher than €100m; typically, there would only be four to five such deals in a year," Ms Hunt said.

The office sector - which accounted for 51pc of investment spend in 2019 - is predicted to attract the most interest this year.

While there is a large volume of new supply under development, accommodating large office requirements will continue to be challenging in 2020, with very little of scale due to complete this year and a large proportion of stock already committed. Among the office complexes due for completion are 2 Cumberland Place and North Dock.

Moving on to the hotel sector, the report found that a "good pipeline" of such properties may be put up for sale this year, including some in Dublin. The majority are expected to be single assets, as opposed to portfolio sales.

Outside of Dublin, the investment opportunities in Cork "remain strong", hampered only by a shortage of them for investors.

However, new stock coming on stream will provide new opportunities.

Irish Independent

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