Overseas acquisitions of heavily-discounted offices in Dublin’s docklands are leaving the area poised to lead the capital’s market recovery, say international researchers IPD.
According to the London- based firm, rents have now stabilised and the fall in capital values is slowing
“Ireland is now delivering higher returns than the UK and investor interest is piqued. Dublin’s docklands will tick all of these boxes for investors,” said researcher Colm Lauder.
“Already this quarter, we have seen Ireland delivering higher returns than the UK, for the first time in four years [0.6% to 0.4]”.
In the docklands, that return rose to 1.7%, which is higher even than the return delivered by London City offices, at 1.2%, he said.
However, any anticipated turn-around in capital values is still some way off, as weak demand from tenants in the second quarter led to a further 1.8% fall in property values nationwide.
Impressive income return performance across all Dublin offices was the primary driver behind the positive total returns having outstripped capital value declines in the second quarter of this year.
The strong income return, at 9.8% year-on-year in 2011, is a positive indicator and a sign there is good value for investors buying into the docklands, said the research group.
IPD remarked on growing investment optimism and opportunism, with two of the largest purchases seen in the Dublin office market for the last four years, namely the purchase of Riverside II, for close to €35m, by a German fund, and Custom House Plaza IV for close to €10m to a private overseas buyer. Such large assets have, typically, fallen 60% in value by now from peak.
Home to major employers such as Google and Facebook, Dublin’s docklands employs 40,000.
Frank Conlon, the IDA’s head of property, noted that “many of our global clients are in growth mode, which is leading to strong demand for centrally located large office properties of good quality”.
He added: “Dublin’s docklands area in particular is witnessing a revival with much of the office interest in the city focused on it.
“The area affords our clients a strong international and flexible talent base, particularly with financial service and digital media skills, and which has a proven transport, utility and social infrastructure.”
Mr Lauder said: “Though Irish property has yet to see any firm signs of recovery, when it comes about, it is likely to follow the same pattern as was seen in the UK, with investors targeting heavily discounted prime assets that can secure strong, long-leased tenants, preferably from large multinational companies.”
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