Residential property deals bolster a weak quarter for Irish office sales
Commercial property sales fell by 18pc to €623m in the first three months of this year
Big-ticket residential sales dominated the commercial property market in the first quarter as overall volumes fell steeply compared to last year, according to new data compiled by CBRE Ireland.
A handful of large apartment block deals meant that more than half the business done in the first three months of the year was in the residential sector.
But the spurt of major residential purchases and a couple of large sales in logistics and suburban offices masked a general softness in the sector, with the lowest spend since the pandemic-hit second quarter of 2020.
Total investment in commercial property across 26 transactions in the first three months of the year was €623m, down 18pc on the same period in 2022 – “a reasonable outturn given the prevailing sentiment”, according to CBRE.
Of that amount, €332.5m was spent on residential sales, the vast bulk of which went on just three major deals, including a significant off-market purchase by an approved housing body.
“Despite widespread expectations to the contrary, Q1 investment volumes in Ireland have surprised on the upside predominantly due to several large deals,” said Colin Richardson, head of research at CBRE Ireland.
“The residential sector continues to be defined by acute supply and demand imbalances, and as such investor interest has propelled the sector to account for half of all volumes in Q1.”
Three of the top five deals in the quarter were in the private rented sector, where “strong investor appetite” was evident.
All three of those transactions were in Dublin. The biggest, Opus on Hanover Quay, sold for €101m. M&G Investment’s purchase of a development in Eglinton Place was €99.5m, while a south Dublin social and affordable housing scheme secured a forward commitment for €92m.
The biggest non-residential transaction was Ingka’s purchase of Greenogue Logistics Park for an Ikea distribution centre at over €100m. The other non-residential deal in the top five was €65m for the Waterside office complex in Citywest, which was sold by IPUT and a Davy fund.
While the first quarter of every year tends to be the quietest, this year’s sales volumes were well below the 10-year average of €900m and about half the level of the first quarter of 2020, just before Covid struck.
However, the rolling 12-month investment spend came in at €5.8bn, largely due to a strong performance in 2022, when volumes rose 10pc – among the few markets in Europe to grow.
The last year has been challenging in commercial property as rapidly rising interest rates have changed investment calculations and pushed yields out.
As a result equity investors, who are not reliant on raising debt to complete transactions, have come more to the fore. Both Ingka and M&G were able to come in without debt financing.
Despite the high proportion of residential sales at 53pc being far higher than the 33pc average, CBRE warned there are some challenges in the market due to higher interest rates, namely the opportunity for forward purchases of apartment blocks.
On the other hand, however, the slowdown in new supply – after a small peak last year – should help values hold up, which CBRE said was a “massive opportunity” for holders of rental stock in the market.