Discounted property prices now sought by investors, say Lisney

Agent Lisney's Q3 report shows shift in sentiment, and 'price discovery' ie - hard haggling

Cork Business and Technology Park, space let to HSE in Q3

Global uncertainty and rising interest rates are impacting the Irish investment property market, with a growing disconnect between vendors’ price expectations — and what buyers are prepared to buy, with discounted prices being sought.

That’s according to Edward Hanafin, a director of Lisney as the company’s Q3 market commentary shows a shift in sentiment by mid-year. However, the Q3 outturn at €1.77bn is well above the quarterly average for the past five years, driven in part by a handful of very substantial sales in the Dublin market, such as the sale of Salesforce HQ and adjoining hotel at Spencer Dock, put at c €500m.

By contrast, the Cork market made up only a tiny fraction of the Q3 spend, at just €54m, with €40m of that accounted for by the sale of a 342-bed student accommodation development by the Munster Technological University to Harrison Street. Also sold were 21 office units in four blocks in Blackrock’s Riverview Business Park, for €10m, a Main Street Carrigaline retail unit (AIB) for €1.25m, and a Bank of Ireland bank branch in Mallow as part of a €8.5m portfolio sale of five properties, at c €2.68m.

For Cork, annual investment turnover may reach €150m with almost €108m already completed. As of the end of September, there was €57m of on-market investment opportunities available in Cork, including the €21m offer of the Douglas Village Shopping Centre. However, according to Ed Hanafin “given the generally large amount of activity occurring off-market, this supply figure may be higher in reality.”

Noting a shift in Q3, which also saw an increased focus on building energy efficiency in funding, Mr Hanafin said that with adjustments in the global economic outlook along with rising interest rates, “the market went into a period of ‘price discovery’. In the majority of cases there was a disconnect between vendors’ price expectations and what purchasers (and their credit committees) were willing to pay. Demand was generally split between investors that are willing to buy assets now, but at discounted prices, and those who have adopted a wait-and-see approach for the next 12 months.”

Q3 figures bring the national year-to-date turnover to €3.77bn (just ahead of the same period last year at €3.5bn). That excluded the €1.09bn sale of Hibernia REIT to Brookfield Asset Management in Q2 as that was by way of a company sale rather than asset acquisition; if included it would bring 2022 turnover to almost €4.87bn “significantly ahead of the same period last year”.

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