Recovery well under way with €800m transacted in third quarter of 2021

Nationally, there’s been a doubling of commercial property investment in the first nine months of 2021
Recovery well under way with €800m transacted in third quarter of 2021

One of the largest investment  sales outside of the Dublin region in 2021 was East Douglas Village, in Cork's Douglas, sold by Lisney for close to €11 million at  a 6.2% return, with rent roll of €760,000

The recovery of Ireland’s commercial property and investment markets from the effects of the global pandemic continues to gather pace, with active overseas investors once more free to visit Irish shores, according to specialist reports issued this week.

The vast majority of activity took place in Dublin. Of the almost €800m transacted in Q3 property investments, 93% was in Dublin City or county, with the rest of the country accounting for just 7%, or €53m.

Nationally, there’s been a doubling of commercial property investment in the first nine months of 2021 over the same Q1-Q3 period in 2020, and it has been the second busiest Q3 since 2015, according to BNP Paribas Real Estate.

They gauge Q3 activity at €800m, bringing the Q1-Q3 total to €3.52bn across 140 investment deals, up from €1.8bn for the same period in 2020 and greater than all of 2020’s trading of income-producing assets with 138 deals recorded for that full-year term.

This chimes with figures also out this week from CBRE recording a total of €793m in Irish real estate investment in Q3 2021.

CBRE put the nine-month total at €3.48 billion, and director Marie Hunt suggested that “the outturn for 2021 will comfortably exceed €4.5bn — a remarkable result considering the challenging backdrop in the first half of the year.”

The recovery is also seen across Europe, said CBRE, with Ms Hunt noting Q3 investment in Europe at €77.3bn, up 55% on Q3 2020.

“With travel restrictions easing, it is no surprise to see increased activity, with notable Q3 transactions involving foreign investors including German, US, French and Dutch buyers”, said Kenneth Rouse, MD and Head of capital markets at BNP Paribas Real Estate.

BNPPRE said German investors are currently to the fore, with €700m invested here so far this year by German funds (22% of total).

Mr Rouse added that “favourable demographics, the resilience of the economy, strong vaccination uptake, and the euro are just some of the factors that help Ireland’s enduring appeal as a good place to deploy capital”.

Despite the introduction of the 10% stamp duty rate for bulk purchases of traditional housing (ie, non apartments) the private rental sector (PRS) is Ireland’s favoured investment vehicle so far, put at 52% of turnover for Q3 and 54% for the year to date at €415m for the last quarter.

According to BNPPRE “high rent levels, demographic pressures (with Ireland having the fourth fastest population growth in EU) and perceptions that housing supply still lags demand, have made Irish residential property a target for many global investors.”

In their November bimonthly comment on the PRS/multi-family sector, CBRE note that just 3% of the €58bn in European residential investment transactions in the first three quarters of 2021 took place in Ireland.

Researcher Ms Hunt added that as well as multifamily product “investors are also increasing their allocations to other living sectors including affordable housing, single family housing and purpose-built student accommodation”.

“Despite the severe supply demand imbalance inherent in the Irish residential market and particularly in cities such as Dublin, Cork, and Galway, investors remain very measured and pragmatic in their approach, and are undertaking considerable due diligence to underwrite multifamily opportunities” she said.

“Investors are also taking time to interpret the consequences of recent regulatory changes, including measures to link rental growth to inflation.”

2021 looks like being a year of “two distinct halves”, with very strong activity in September and October, as well as an overhang of ‘overly protracted negotiations,’ said CBRE director Ms Hunt.

She asserts that “the ability of investors and occupiers to travel to undertake property inspections since restrictions were lifted in the Summer has been transformative for the Irish commercial property market”.

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