Dominant Dublin drives up property investment 170%

Investment in Irish property assets rose 170% in the first quarter of this year above the same period last year — but 94% of activity was in the Dublin market, and as yields compressed investors “acquired assets across the risk spectrum”, according to Davy Research.

Dominant Dublin drives   up property investment 170%

Over half of the €930m invested already this year went into the office sector, some €524m, noted Davy Research, which said it expect the fall in yields to soften during 2014.

Observing the start of sales of shopping centres, headed by the €253m sale of 73% of the Liffey Valley Shopping Centre to Hines and HSBC Alternative Investment, Davy noted that investors were acquiring assets “across the risk spectrum. There was increased activity in the core plus and value-add categories, as competitive pricing for Grade A assets pushed investors out the risk curve.”

The top asset sale so far was Dublin’s Central Park commercial property portfolio in Leopardstown, bought by Green REIT and PIMCO last month for €311.5m, and showing a 7.3% yield on the commercial element on acquisition.

Citing recent CBRE and JLL report statistics, Davy said there has been a 150 basis points shift in the last 12 months for prime equivalent yields for Dublin offices, now standing at 5%.

“While significant, we forecast a softening in the strength of the yield compression as the levels of deal flow to market, particularly from Nama, increase,” said a Davy report. “We continue to see significant upside potential in core plus and value-add risk category assets across the Irish commercial real estate market.”

Commenting on the strength of Dublin’s office market, Davy said space market dynamics, continued expansion by occupiers, “and pricing of core plus and value-add assets continued to attract investors into Dublin’s office market in Q1”.

Assets on Dublin’s prime retail thoroughfare, Grafton St, traded for yields from 4.6% to 6.7%, and rents in Dundrum rose for the first time in two years to €3,500 per sq m.

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