Dublin office market continues to attract investors

Dublin remains an attractive destination for foreign investors looking for a return on prime office investments despite a significant reduction in yields in the past number of years.

Strong demand over the past three years has pushed up the price of prime Dublin office investments and cut yields in half from 8.5% to 4.3%.

Despite the large swing over the past 36 months as the market has recalibrated following the crash, Dublin office property remains among the most attractive in Europe, according to Savills.

Research director John McCartney said: “Overall, my analysis of the data is that we are likely to see continued investment flows into prime Dublin office properties, driving further price growth and yield compression.

“That said, with rents also rising very quickly, investors will be keeping a close eye on capital values which, with further aggressive growth, could begin to look challenging.”

Data compiled by the real estate agency identifies Dublin as “an outlier” given the scope for investors to make a healthy annual return on their investments in the market.

While higher yields are available in Athens and some cities in eastern Europe, capitalisation rates in Dublin exceed those available in most large cities across western Europe.

Of particular interest is the disparity between Dublin and London, with yields 43% higher in the former. Net office yield in London stands at 3% in comparison to 4.3% in Dublin.

Similarly, yields in other major European cities such as Paris (3.6%), Munich (3.9%), and Madrid (4%) are eclipsed by their Irish counterpart.

Unsurprisingly, long-held investor favourites such as Paris, London, and Berlin are still among the top destinations for investment while the more peripheral markets of Dublin, Madrid, and Milan also have an established place in the market.