Tuesday 23 January 2018

Irish commercial sales may see short-term Brexit boost

Green Property sold the Blanchardstown Shopping Centre.
Green Property sold the Blanchardstown Shopping Centre.
Denis O'Brien's LXV Building was aquired by CNP Insurance for €85m.

Donal Buckley

The Irish commercial property investment market looks set to achieve a stronger than expected performance this year, despite fears that a Brexit storm may brew some adverse winds.

At least one agent has indicated that some UK investors are holding off on sales of Irish property that were due to come to the market and won't move until they have a clearer view on the effects of Brexit.

Nevertheless, all agents are confident that the €3bn sales which were forecast at the beginning of the year will be exceeded.

John McCartney of Savills is sticking to his even higher forecast of €3.5bn, so 2016 could yet see either the second or third highest level of deals ever recorded in the Irish market.

Part of the reason for the confidence is that the first half of the year has already seen deal levels come close to the early €3bn forecasts.

Adrian Trueick, director of Knight Frank Ireland, says the second quarter of 2016 was the strongest performing quarter ever recorded for the Irish commercial property market.

"This year, to date, transactions are almost €1 billion ahead of the record-breaking year of 2014," he adds.

CBRE's Marie Hunt reckons the second quarter saw 61 deals in the million-plus bracket, valued at a total of €2.177bn. This brings to 116 the number of deals and €2.91bn the total value achieved for the first half of the year.

All agents had expected the market to slow down this year with Nama's stock of remaining properties being less valuable than in previous years and other banks such as Lloyds and Ulster Bank having less stock available for sale.

However, then along came some unexpected sources of supply in the form of Irish property investors who decided to take advantage of the powerful combination of a resurgent Irish economy and buoyant overseas institutional demand for Irish commercial property investments.

Stephen Vernon and his partners at Green Property decided to sell on Blanchardstown Town Centre, incorporating two retail parks and office space, which was bought by Blackstone for €950m. Businessman Denis O'Brien also sold LXV, St Stephen's Green, the first new office development of the post-crash era which was purchased by CNP Insurance for €85m.

Another substantial Irish seller was Tetrarch Capital, headed by Michael McElligott. It sold the Harp Portfolio of four office buildings in Dublin 1 and Dublin 7 for €27m to a private Irish investor and also sold Project River retail and office portfolio in Dublin for €21.5m. Both portfolios contained properties which had been developed by Liam Carroll.

Two other significant sales also boosted the Q2 figures: Nama sold One Spencer Dock, which is let to accountants PwC, to a Middle Eastern fund for over €240m, and Aviva sold Project Kells, which includes its Nassau House offices on the corner of Dawson St, to Pan-European fund Meyer Bergman and Irish investment firm BCP for €93m. Starwood and Chartered Land have also recovered about €115m of the €184.3m which they paid for Elm Park in Dublin 4 last year by flipping two tranches of Elm property this year.

One of these tranches comprised 211 apartments which they sold to IRES REIT for around €59m and the other comprised the Allianz office block, which was bought for more than €56m by Standard Life. The partners retain other office blocks and houses in the development.

Dublin continues to account for the vast majority of sales, with over 90pc of investments by value in the second quarter of this year.

Marie Hunt said that "if we do another €600m in the second half of the year, we will have matched last year", when she reckons about €3.5bn of deals were done, making it the second highest investment performance ever for the Irish market.

The record was set by the €4.5bn in deals in 2014. However, not all agents agree as to the value of last year's deals. JLL's Hannah Dwyer puts it at €3.4bn while Savills' John McCartney reckons it was as high as €3.8bn.

Despite the strong first half, the outcome for the second half is more difficult to predict. Marie Hunt says much of the present activity is occurring off-market and this is expected to be a trend going forward.

Hannah Dwyer says: "It is difficult to gauge where investment volumes will end up. Ireland is well-positioned from an occupier and investor perspective to benefit from some of the post-Brexit uncertainty, and we are expecting to see a positive short-term bounce in demand from these sectors.

"However, we are entering a very sensitive period for the global market. Ireland's close links to the UK is of concern from an economic perspective."

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