Ireland's property investments proved resilient in 2020

New MCSI/SCSI index shows best and worst in property class, with multi-let  residential schemes emerging as an alternative asset

Despite the obvious impact of the global Covide-19 pandemic Irish property investments are performing well. Photo Sasko Lazarov/Rollingnews.ie

A NEW international annual index measuring the performance of €10bn worth of Irish property investments shows ‘surprising resilience’ for the year 2020 —  despite the obvious impact of the global Covide-19 pandemic.

The commentary coming on the back of the detailed analysis is that while property is a strong long term investment class, the key to security is diversification across property asset classes.

International investment rating agent MCSI has paired up with Irish chartered surveyors body SCSI on this new annual index (it already reports on a quarterly basis). It clearly shows the rise of the residential market as an increasing important ‘alternative’ for funds, stepping up a gear since the PRS sector took off in 2018, when it was the largest sector by volume.

Not surprisingly, the MCSI/SCSI index (to December 2020) which analyses the unlevered total investment returns across 490 Irish properties and 21 funds shows most negative impact from the Coronavirus on the office and retail sectors, with retail faring the worst.

Dublin’s prime city retail streets, Grafton Street and Henry Street, saw returns fall by 23.3% and 27.2% respectively. Overall, commercial property returns dipped just -0.5% for the year 2020, coming off the back of six years of strong positive results, and an improvement on the 0.9% drop in the MCSI’s last quarterly survey. Comparing annual capital value growth, recorded in 2019 and 2020, the index “articulates the polarisation in returns by sector and the structural shifts that COVID-19 has accelerated.”

Offices returns fell during 2020 but still managed to show a positive return of 2.7%, down from 6.2% return in 2019.

In a commentary on the largest element of the new annual index by volume -  offices -, Declan Bagnall, who’s Chair of the SCSI’s Commercial Agency group, said “there was always going to be a time lag effect within this sector as business rapidly adjusted to the working from home model.

“Undoubtedly there will be changes to the working environment going forward. Whereas some industries and roles can embrace remote working more effectively, as we pass the one year mark under these conditions it is becoming clearer that the office will still hold a strong presence in the world of business into the future,” he asserted.

As widely noted too elsewhere, the performance of the Industrial/Logistics sectors “continue to be the shining light in the sector with an overall annual return of 8.7% outlining the continued lack of supply in the sector.”

The SCSI’s Declan Bagnall adds that “what this data underlines is that property is a strong, long-term investment class but diversification is key. Retail and hospitality have, unfortunately felt the brunt of this pandemic more than any other sector. We are hopefully coming closer to the end of the pandemic and as long as landlords and tenants work together, we would anticipate a bounce back from this sector. It will however take some time to recover”.