Record property investment levels as workers return to offices

The retail sector also performed strongly in the third quarter of 2021 accounting for 14% of deals

Work underway on the construction of a second office block at Horgan's Quay, Cork, which will add 130,000 sq ft of space to the six-acre site. Picture: Denis Minihane.

Real estate investment in Ireland has reached a record €350bn in the first three quarters of this year as estate agents point to pent up demand for property since Covid restrictions have been eased.

An analysis by Savills found that almost €800m was invested in the Irish property market in third quarter, a figure 25% higher than a typical third quarter over the long-term average.

 Savills said in 2020 that travel restrictions hampered the ability of foreign investors to physically come to Ireland. 

"We are now seeing a resumption of the strong levels of activity present before the pandemic with several large deals that are close to signing set to drive a strong Q4," Brendan Delaney, divisional director of investments at Savills, said. 

"Based on our analysis we expect to see year-end totals of between €4.75bn and €5.25bn in 2021, the second strongest year this cycle."

The report found that the retail sector performed strongly accounting for €107m in deals in the third quarter, 14% of the total volume; this is the first time since Q1 2019 that the sector has accounted for more than 10% of total volumes. 

"We have seen a strong depth of demand with various bids received both for individual lots and the entire portfolio," Mr Delany said. 

Extrapolating from this process it would appear there was close to €500m worth of capital interested in these Irish retail assets.

Savills said investment in the office sector during Q3 was less than €140m and was typically for smaller lot sizes, with individual deal sizes below €30m and for more secondary grade stock. 

"We expect this to change approaching year-end as the sector begins to recover from the impact of the pandemic, with office developments reaching completion and lease-up being achieved we will see a pick-up in investment volumes in the sector," Mr Delaney said.

September 20 marked the gradual return of office-based work as restrictions were lifted with most companies in Ireland and across the globe planning a hybrid working model between the office and remote working. 

However, office developers and estate agents say they are confident of future demand for office space. 

In Cork city, construction commenced in recent weeks on No 2 Horgan’s Quay, adding 130,000 sq ft of space to the six-acre CIE-owned site as part of a €160m mixed-use development by Clarendon Properties and BAM.

A separate report from Savills on the Dublin office market found that activity responded strongly in the third quarter after a cautious first half of the year. 

Office take-up reached 396,000 sq ft with a total of 42 deals completed. While this is well below the long-term average of 668,000 sq ft per quarter, it represents a marked improvement on the 23,000 and 147,000 sq ft which were transacted in Q1 and Q2, respectively.

They said there are now encouraging signs that the market is strengthening as occupiers start to have more clarity on the post-pandemic working world and government restrictions start to loosen.

Shane Duffy, director of offices at Savills Ireland, said that after a dismal first half of the year, transactional evidence in the third quarter has been "very encouraging" for the office market. 

By and large, headline rents have held firm as the flight to quality among occupiers becomes more evident. 

"Occupiers are focused on securing the best options on the best achievable rental terms in line with growing environmental, social, and governance (ESG) focus," Mr Duffy said. 

"Weekly viewing tallies throughout September have been higher than at any stage in 2019, representing a clear pent-up demand across the market."