Paul McNeive: 'Asian connections provide the way forward in Ireland'
The right moves
THOSE involved in the property market should make themselves aware of the fast growing level of Asian investment in Irish property and business. And with Brexit deterring some of the traditional Asian buying in London, Ireland looks set to capitalise as Asian capital focuses on other western European capitals.
As a result, Dr Henry Chin, head of research for CBRE in Asia Pacific and EMEA, was in Ireland this week to speak to colleagues and key CBRE clients about the recent trends, and CBRE arranged for me to speak to him.
According to Dr Chin, lower interest rates and historically low yields in the Asian regions means that outbound Asian investment is here to stay. He and his CBRE colleagues recommend that the Irish real estate market needs to familiarise itself with these new investors, their investment preferences and the typical structure of transactions, compared with the traditional Irish and European investors in Ireland.
According to Marie Hunt, executive director and head of research at CBRE Ireland, more than €800m has been invested directly in the Irish commercial property market by Asian investors since 2017, and nine transactions were completed in the first half of this year. Asian investors accounted for 11pc of total investment spend in Ireland in 2018 and 19pc in the first half of 2019.
Examples of properties sold to Asian investors include the Sorting Office office building in Dublin Docklands for €240m; Charlemont Exchange office building in Dublin 2 for €145m; Dublin Landings, Dublin 2, for €106.5m, and The Beckett office building in Dublin 3, for €101m.
Several other notable transactions are in legals at the moment and expected to sell to Asian buyers, including the Bishops Square office building in Dublin 2 and the Nova Atria building in Sandyford Business Park.
According to CBRE, there is a significant pool of Asian capital targeting property investment opportunities and many potential buyers are focusing on Dublin because of Brexit and to take advantage of currency arbitrage.
Whilst most of the interest to date has been for office buildings, CBRE has noted Asian interest in deploying funds into the build-to-rent sector also.
Dr Chin added that there is a growing Asian appetite for logistics buildings, although it is accepted that this could prove challenging here, as large-scale logistics assets are rarely traded. He also advised that there is emerging interest in "multi-family" properties and data centres.
Asian investors are attracted by the relative pricing in Ireland compared to their home markets, with prime office yields currently trading almost 475 basis points higher than 10-year government bonds.
Whilst outbound investment from mainland China has declined recently, it has largely been replaced with funds from Korea, Singapore and Hong Kong.
Nonetheless, there has been a slew of sales of Irish hotels to Chinese purchasers, including the Watermarque Hotel in Kerry, The Best Western Hotel in Rosslare, Fota Island Golf and Hotel Resort in Cork, Leixlip Manor and Gardens in Kildare, The Strand Hotel in Co Wicklow and the Derrynane Hotel in Kerry.
The largest Asian hotel acquisition recently was the Temple Bar Hotel in Dublin, bought for about €55m.
Ireland was traditionally viewed as being too small for many of the large Asian investors, who focused their attention on London and other EMEA capitals. However, with 11 transactions exceeding €100m in value in 2018, and new buildings being produced here as a result of our construction boom, Asian investors now see Ireland as a real opportunity.
In addition to these direct investments, there has been significant Asian capital invested indirectly into the Irish real estate market recently. With Chinese foreign direct investment into Ireland increasing by 75pc in the first half of 2019, 20 Chinese companies operating in Ireland, and growing trading links, Asian investment will be a long-term source of capital. I recommend some Asian connections.