Investment Property Transactions at Record Levels

Following a record number of investment property transactions in 2013, property consultants Savills Ireland say that the value of turnover in the market could exceed €3bn this year. In their latest market outlook, Savills note that 140 investment property sales worth almost €2bn took place in 2013 – the highest level since 2006.

Economist and Director of Research at Savills Ireland Dr. John McCartney says there is now a growing sense that Ireland’s economy is on a sustainable recovery path which, in turn, is underpinning the demand for investment properties;

 

“Our successful exit from the EU/IMF assistance programme, and the significant progress that has been made in bringing the fiscal deficit under control, has improved the external perception of Ireland as a location for investment. This renewed confidence appears to be justified by the main macro-economic aggregates. GNP – the most representative barometer of activity in the Irish economy – expanded by 3.9% year-on-year in Q3 2013”.

McCartney also added that rising employment has increased the attractiveness of office investments;

In net terms, 60,900 new jobs were added in the economy last year – an increase of 3.3%, which is remarkable by international standards. This is feeding through to stronger demand in occupational markets. The numbers employed in in professional services, ICT and administration has increased significantly since 2010 and this is driving strong net absorption in the Dublin office market. Consequently the vacancy rate for Grade A offices in the traditional Central Business District is now just 4.1%.”

Investments in 2014 

According to Domhnaill O’Sullivan, Director of Investments at Savills Ireland, the value of investment transactions this year could exceed €3bn, surpassing previous records. However, he said that this would be subject to a number of factors including the availability of stock;

“2013 exceeded all expectations in relation to investment volumes. At this point in 2014 there are approximately €750m of transactions agreed or in legals, and an estimated pipeline of around €600m coming to the market in the short-term. A significant volume of stock is still waiting to be traded and if any of the banks currently holding large volumes of stock decide to de-leverage via large portfolio sales, we could see turnover reach record levels by the end of the year.”

Location

Savills also reported that Dublin offices remained the sector of choice for investors in 2013 with vacancy rates continuing to fall; 

O’Sullivan commented, “The demand for office properties in 2013 was underpinned by the recovery in the occupational market which saw the overall vacancy rate decline during the course of the year. This has led to a significant recovery in prime rents and we expect further increases this year.”

Savills also report that, of the €191m of investment sales outside Dublin, €91.8m was accounted for by just three deals; City Gate Office buildings in Cork (€40m), Edward Square Shopping Centre in Galway (€27.3m), and The River Lee Hotel in Cork (€24.5m).

Despite this, O’Sullivan expects a pick-up in the regional market this year;

“While the capital will continue to be the primary focus for investors, we anticipate an increase in regional sales activity as new portfolios are brought to the market and national loan books that have traded in previous years begin to be broken up”.

International and Domestic Investment 

American Investors remained very active in the market, acquiring five of the top ten assets sold in 2013. Kennedy Wilson made two of the largest acquisitions, with the others large lots being acquired by Lone Star, King Street and Pimco / Brehon Capital.

However, according to O’Sullivan, one of the defining features of the investment market in 2013 was the return of the Irish Institutions;

“Demand from Irish institutions was bolstered by the introduction of Ireland’s first REIT, which invested €202m during the course of 2013. With others likely to follow, we expect that REITs will form a significant part of overall market demand going forward. This, in tandem with increased demand from established Institutions such as Irish Property Unit Trust (IPUT) and Irish Life, will further underpin an already strong investment market.”

In total, Irish investors acquired five of the top ten investments, with one institution – Irish Property Unit Trust (IPUT) – acquiring two of the highest value office lots (1 Grand Canal Square, a prime office building multi-let to HSBC, Accenture and Activist, and Riverside II, a modern office building located on Sir John Rogerson’s Quay).

The full report can be viewed here – http://bit.ly/MMKIf6