German group in €190m deal for Docklands office block
Union Investment, a German real estate fund manager, has acquired 5 Hanover Quay in Dublin's Docklands for just over €190m.
The property is let to two tech companies - DocuSign International, which leased 9,162 sq m in the building in the first quarter of the year, and Aptiv Global Operations.
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The building was completed in 2018 with 15,000 sq m of office rental space.
"The Docklands area of Dublin is one of the most dynamic office markets in Europe at the moment," said Martin Schellein, head of investment management, Europe at Union Investment.
The Hamburg-based company has €41.4bn under management and now has a commercial portfolio of five properties in Dublin worth more than €620m.
A surge in investment by tech companies has driven large office property deals in Dublin, with 11 deals over 5,000 sq m completed last year and continuing this year, and Facebook and Salesforce signing big deals in the city.
In June this year, the German real estate investment manager announced the acquisition of Ballast House for UniInstitutional European Real Estate.
Analysis from real estate service provider Savills says that despite a four-year boom in Dublin office space construction that has delivered 508,723 sq m of new space, the net additional space now stands at just 229,165 sq m when demolitions are subtracted from the total. According to the most recent Savills report, the vacancy rate in Dublin is 8.4pc of stock overall, but it is much lower in the central business district, at 5.2pc, and even lower in the Docklands, at 4.5pc. Union Investment, which manages a range of funds for both private and institutional investors, said it intends to monitor the Dublin office market "for further acquisition opportunities".
An increasing number of funds have started investing in the Irish property market since the end of the recession.
Low global interest rates have pushed more funds into the property market, thanks to the negative or low yields on offer in the bond market.
According to the Central Bank of Ireland, by the end of 2018, real estate investment funds had amassed commercial property here worth €18bn - dwarfing the €4bn held by insurance companies and the €3.1bn held by pension funds. Even Irish banks' commercial property loan book total is significantly less at €12bn, much of it non- performing.
Real estate investment trusts have only been in Ireland since 2013 and are significantly funded from abroad.
The Central Bank has started to warn that the dominance of offshore money in Ireland's commercial property market - including retail sector landlords and so-called cuckoo funds snapping up entire apartment blocks - creates new risks that they will import boom-bust cycles from the rest of the world, increasing the chances of a bust here.