Saturday 20 January 2018

Stock shortage putting the brakes on 2017 sales

Maurice O'Neill and Sean O'Neill, both directors of TWM and Stephen Walsh, economic consultant
Maurice O'Neill and Sean O'Neill, both directors of TWM and Stephen Walsh, economic consultant

Donal Buckley

So far the 2017 property market has been slow to get into gear with the first two months characterised by a lack of product.

"Coming into 2017 there was just under €850m of stock available of which about €400m is now under offer or sold".

These were the comments of Sean O'Neill, managing director of property consultants TWM.

He was speaking at the launched of TWM's new Quarterly Economic and Commercial Property Highlights.

With few assets on the market this means that over €650m of stock is currently available including five office blocks reportedly for sale in Cherrywood for around €160m, two office blocks on Harcourt Street for about €50m and Tesco Roscrea for €12.5m.

Current supply is just 11pc of last year's turnover which he acknowledges was a near record year when €4.5bn worth of asset deals were completed and these were skewed by large deals such as Blanchardstown and Liffey Valley Shopping Centres.

"Whilst there is demand from investors, vendors seem to be slow to bring opportunities for sale. This does not appear to be related to Brexit or Trump but seems now to be a characteristic of a January hangover following an active last quarter, as investors and sellers re-gear," Mr O'Neill says.

Whilst a similar situation existed this time last year, things were somewhat different in that there were more sales in the pipeline and as a result Q2 turnover hit a level of €2.1bn.

Despite much talk about significant stock coming through there appears to be a lack of urgency to bring these sales forward. As a result investors, particularly for larger lot sizes, are endeavouring to seek out "off market" opportunities with many direct approaches being made to owners. Vendors are also progressing with more off market targeted sales processes to a select group of potential purchasers.

Due to the lack of product and limited development finance, investors are getting more opportunities to engage in pre- funding of office blocks, a feature of the market which will become more prevalent this year.

Another characteristic of the first couple of months has been the increase in finance from new debt providers which is starting to have an impact on the smaller lot sizes with some existing borrowers now being able to acquire properties from loan owners with the assistance of these alternative lenders.

This could also be a reason for less stock coming to the market as deals are quicker and easier to complete with existing borrowers.

A third characteristic we are seeing is an increase in enquiries for secure income on long leases.

The uncertainty in the global market is also creating an increase in demand from risk averse investors seeking a secure return.

With returns from other types of investment extremely low and likely to remain so and with uncertainty in many markets, property remains the investment of choice particularly if it can be combined with a very secure income stream.

TWM's quarterly explains the relevance of recent key economic statistics to the commercial property market.

Its Global Watch monitors Brexit and the Trump Presidency and how events will affect property. It is compiled with independent Economist, Stephen Walsh.

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