Monday 23 October 2017

Investment deals may exceed €1.2bn in 2013

La Touche House office investment in the IFSC, Dublin 1, which was bought by new market
entrant Credit Suisse for €35m. and the yield is reported to have been 12pc.
La Touche House office investment in the IFSC, Dublin 1, which was bought by new market entrant Credit Suisse for €35m. and the yield is reported to have been 12pc.

Donal Buckley

Investment property deals this year could exceed €1.2 billion following more than €600 million in transactions in the first half of this year and the value of some commercial properties are increasing.

At least two estate agents report that investors have up to €6bn to invest in Irish property. However they also warn that some of those prospective buyers may be deterred by the delay in bringing some attractive investments to the market and the whole sales process.

Jones Lang LaSalle estimates that total investment volumes for the first half of the year reached €613 million across 47 transactions while CBRE says 34 deals for €1m plus properties generated €603m.

Lisney's Duncan Lyster says prices have improved and buyers are paying over the asking prices as reflected in narrower yields. Prime Dublin city office yields have tightened from 7.65pc last December to 7pc, suburban offices to 8.75pc and industrial to 8.75pc.

While pointing out that retail rents continue to fall, he also says that prime retail yields have narrowed from 6.75pc six months ago to 6.6pc.

On the other hand Marie Hunt of CBRE says prime yields have strengthened faster than was anticipated and are even lower with prime Dublin office yields at 6.25pc and prime high street retail yields around 5.75pc at the mid-year point and likely to strengthen further.

Hannah Dwyer, head of research at JLL expects sales activity to pick up pace over the rest of the year with an increase in supply mostly coming from NAMA and non-NAMA banks.

"Investors who have up to €6bn of capital looking to invest in Ireland, are looking to avail of the country's economic recovery and better-than-average European returns. We expect to see year-end investment volumes reach between €1.2bn and €1.5bn for the whole of 2013," she adds.

The largest deal this quarter was the sale of the Clancy Quay residential block which was purchased by Kennedy Wilson for €84m. The largest office transaction in the quarter was the sale of La Touche House in the IFSC to Credit Suisse for €35m. JLL acted as agents for the vendor, Warrens Private Clients, for the sale.

Duncan Lyster says there has also been some activity outside the main city area with well-let units in smaller towns finding buyers. "Typically, initial returns for such properties are close to or above 10pc.

He also points out that supply of new product to the market continues to be below the level of demand.

"Just over €170 million (by guide price) of properties came to the market in Q2, and whilst this was across 63 properties, it was insufficient to meet demand by some margin.

Some of the notable new properties to come to the market include 13-17 Dawson Street, Dublin 2, guiding €15 m; Block 2 Clanwilliam, Dublin 2 guiding €8.25 million; and Blocks A&B Lake Drive, Citywest, guiding €6.5 million.

He does not expect supply to improve until September as the liquidation of IBRC had slowed the flow of product from that source.

Nevertheless there are early signs that up to €500m of stock could come to the market in the second six months of the year, which will, if sold, keep the market moving at a reasonable rate.

"We believe that stakeholders controlling assets, be they owners, receivers, banks, etc, should be considering placing properties on the market to take the benefit of the strong demand. There is little downside risk in terms of pricing and we anticipate the current level of demand will not be sustained in the medium-term.

"There is a danger that some potential buyers are becoming bid-weary.

"Those that have been chasing publicly marketed prime Dublin assets are becoming frustrated with the sales process. It may be the case that some will move on to other international markets with recovery prospects, such as Spain, where the competition for assets is less intense."

He expects the capital gains tax incentive to generate a spike in activity in Q3 and Q4 but this may lead to a slowing of activity in early 2014.

"We expect more activity outside of Dublin in the coming months as 'yield buyers' are forced to look outside the capital," he adds.

Irish Independent

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