Price of development sites steadies as build costs bite

Launches of development land sites dominated the columns of the commercial property media in the first three months, however news of any actual sales was thin on the ground.

This follows a year when CBRE reported that as much as €1.5bn worth of development land traded while Cushman & Wakefield estimated that €1.39bn was transacted across the four key markets of Greater Dublin Area, Cork, Galway and Limerick last year. Both agents agree that 2018 saw almost double the value of sales compared to 2017.

Donal Kellegher of Cushman attributes 2018's growth to Nama's sale of some of the biggest remaining residential land banks and mixed-use projects in its portfolio.

He says the market for the best sites and projects remains strong from well-resourced developers and their funders, underpinned by clear residential and commercial end user demand, as well as demand for private rented residential investments.

John Swarbrigg of Savills says that while he expects to see more sales by private equity owners who bought loans, as well as by investors who added value with planning permissions, he does not see a huge amount of land coming to market.

He adds that land values this year remain confident at around the same levels seen in the last quarter of 2018. He also acknowledged that some developers find that rising construction cost inflation is helping to curtail the risk of inflationary land values.

One developer, who wished to remain anonymous, expects that the combination of the Central Bank limits on mortgages and their dampening of house price inflation is having a knock-on effect in calming inflation of land values. He believes that some sites have been slow to sell but that the vacant site levy is encouraging more non developer land owners to sell.

"Values have calmed down and any price increases are likely to be in line with inflation," he adds.

On the other hand, CBRE reported brisk activity in the first two months of this year with considerable off-market trading underway and a focus on closing out sales that for whatever reason didn't conclude in 2018.

The largest sale so far this year was the 3.81 acre Sandyford Central site, which was sold for about €38m to Avestus Capital Partners and Ares Management. Agents Cushman & Wakefield handled the sale which equates to around €10m per acre. The vendors, receivers at Duff and Phelps, had obtained planning permission for 459 apartments. That suggests about €82,800 per apartment site.

In Dublin's north-western area, Joe O'Reilly's Spellet Developments, a company linked to Chartered Land, purchased Rathborne, a 4.97 acre site in Ashtown, Dublin 15 for around its €22m guide price. It has planning permission for 130 houses and 166 apartments. Recent increases in apartment guidelines may encourage Spellet to seek greater density in the apartment section of the site.

Some developers have also been selling on sites.

Ardstone Homes, an investment fund headed by Donal O'Neill, sold two Co Kildare sites to Glenveagh Properties for more than €50m. Combined together the sites at Leixlip and Newbridge have full planning permission for 793 homes.

Ardstone is continuing to purchase sites for residential developments and is expected to deliver 1,000 houses by this year. It is currently building in Naas, Co Kildare, Rathfarnham, Co Dublin and Ashford, Co Wicklow.

Observers are keenly awaiting the outcome of a number of bidding battles for sites which are currently on the market. One of the most valuable of these is the prime 3.57 acre redevelopment site at DIT's Kevin Street campus near to the lively Wexford St junction with Dublin 8. Evan Lonergan of agents Knight Frank is guiding €80m as the site is considered to have potential for offices, residential, hotel, student accommodation and retail projects. It is strategically located close to the popular pubs and restaurant area of Camden St.

Nearby Knight Frank is guiding €10m for a 0.55-acre site at Fumbally Lane, Dublin 8, which has permission for 34 apartments above a restaurant in a new-build block, as well as the refurbishment of a period building to provide about 30,000 sq ft (2,787 sq m) of offices

In the south Dublin suburbs between Foxrock and Cherrywood Peter Garrigan of agent CBRE has been guiding €35m for a 29.4 acre site at Brennanstown, Dublin 18, which is to be sold on the instructions of Nama and Declan McDonald of PWC. Mr Garrigan says it has development potential for more than 400 residential units and around 6,458 sq ft (600 sq m) of commercial facilities.

To the north of the city John Swarbrigg of Savills is guiding €32m for a 9.63-acre site in Cabra, Dublin 7, with planning for 419 apartments. It is another of the sites being traded on by Patrick Crean's Marlet which snapped up a number of sites after the crash.

The same agent is guiding €13m for a 33.65-acre site with planning permission for 361 houses at Newbridge, Co Kildare.

His colleagues Mark Reynolds and Nicky Conneely are guiding €27.5m for 65 acres at Clonburris in west Dublin between Lucan and Clondalkin. An SDZ "fast-track" planning for the Clonburris zone envisages a new town of about 21,000 people being housed in 8,400 homes including at least 2,700 social and affordable units on 280 hectares. The zone adjoins the Dublin-Kildare railway line and the Grand Canal and is less than 11km from the city centre.

The development potential of pubs with car parks is again attracting attention from developers and the most recent of these is the 2.7-acre Magic Carpet pub and site at Cornelscourt, Dublin 18, for which Lisney and Morrissey are guiding €12m. It has potential for 70 apartments, four detached houses and 10,764 sq ft of commercial space to include a pub and retail units.