Prop­erty deal to­tal to hit €2bn by end of 2017

Irish Independent - Business Week - - COMMERCIAL PROPERTY -

for fi­nan­cial ser­vices firms plan­ning to re­lo­cate staff post-Brexit.

How­ever, it found that in­vestor sen­ti­ment for re­tail waned in Q3, al­though rental value growth re­mained pos­i­tive, driven by prime Grafton Street shops.

Lis­ney’s Q3 re­port adds: “The strength of the bull mar­ket in the last four years has cre­ated an as­sump­tion that all stock that goes on the mar­ket will sell.

“This has been ex­posed in re­cent months with a num­ber of high-pro­file sales fail­ing to com­plete, in­clud­ing shop­ping cen­tres in Cork (Black­pool), Na­van and Mullingar. Ul­ti­mately, these fail­ures come down to pric­ing mis­matches be­tween ven­dors and the mar­ket as there is de­mand for op­por­tu­ni­ties in all sec­tors and across the spec­trum of lot sizes.

“What is no­table is a grow­ing di­ver­gence be­tween prime and se­condary prod­uct, which had be­come too nar­row in re­cent years.”

Nev­er­the­less re­tail ac­counted for 42pc of the value of all trans­ac­tions in Q3, ac­cord­ing to Lis­ney, and re­tail yields hard­ened by five ba­sis points (bps) in the quar­ter to 3.2pc, also re­flect­ing a re­duc­tion of 55 bps over 12 months. This con­trasts with the of­fice sec­tor, where yields have re­mained un­changed over the 12 months at 4.5pc.

The most high-pro­file sale was GLL’s dis­posal of the AIB branch build­ing at 100/101 Grafton Street to Ir­ish Life for a re­ported €50.11m or a net ini­tial yield of 3.4pc.

Fur­ther­more three re­tail trans­ac­tions ac­counted for €46.75m of the off-mar­ket sales.

Ms Fin­negan points to a re­cent up­surge in off-mar­ket deals, say­ing: “It rep­re­sents a two-fold in­crease on the same pe­riod last year.

“In the year to date, ap­prox­i­mately €272m, or 21pc of to­tal in­vest­ment turnover, com­prised off-mar­ket deals… Fur­ther­more, it is also rea­son­able to as­sume, that due to the na­ture of off-mar­ket deals, the share of such trans­ac­tions could in fact be higher.”

In­ter­est­ingly at a time when some com­men­ta­tors have raised con­cerns that the stamp duty in­crease may dampen in­vestor de­mand, at least two ex­perts say the mar­ket may face a short­age of sup­ply.

“Lack of sup­ply over the past 12 months has been a key cat­a­lyst (for off mar­ket deals) ... Pur­chasers are now look­ing be­yond what is avail­able on the mar­ket and are ac­tively ap­proach­ing pos­si­ble ven­dors in or­der to ac­quire prod­uct,” says Ms Fin­negan.

Mr Lys­ter sug­gests that the short­age may lead to “fur­ther for­ward-fund­ing and off-mar­ket deals in the com­ing quar­ters”.

This short­age is seen in the of­fice and res­i­den­tial sec­tors, where de­mand is out­strip­ping the sup­ply of in­vest­ment as­sets com­ing to the mar­ket.

“Given the depth of this de­mand, in­vestors are be­ing pushed to main­tain and even harden yields,” Mr Lys­ter says.

He also says that a fea­ture of the mar­ket in the last 12 months has been the re­sale of as­sets sold post-crash by the early buy­ers who pur­chased be­tween 2010 and 2014.

A no­table ex­am­ple of this in Septem­ber was the re­turn to the mar­ket of the Cramp­ton Build­ings, a multi-let re­tail block in Tem­ple Bar that in­cludes the Ele­phant & Cas­tle res­tau­rant.

In 2014 it sold for a re­ported €8.26m to Ard­stone, and if it sells for its ask­ing price of €11.75m this sug­gests a €3.49m or 42pc in­crease over three years. It also sug­gests a net ini­tial yield of al­most 5.5pc af­ter the stamp duty in­crease.

Another re­sale ex­pected soon is for the De­part­ment of Jus­tice build­ing on Stephens Green. Dublin-based in­vest­ment group SW3 Cap­i­tal bought it in Oc­to­ber 2014 for €16.5m. It was re­cently re­ported that US in­vest­ment group Kennedy Wil­son may be about to buy it for close to its €20m ask­ing price. A 0.18 hectare (0.44 acre) res­i­den­tial de­vel­op­ment site on the Swords Road, Malahide, Co Dublin has been brought to the mar­ket by CBRE for a guide price of €975,000.

The site, cur­rently oc­cu­pied by a derelict bun­ga­low, is on the Swords Road amid a num­ber of new and es­tab­lished res­i­den­tial de­vel­op­ments, in­clud­ing the long-es­tab­lished Se­abury hous­ing es­tate.

The im­me­di­ate area has ex­pe­ri­enced an up­surge in de­mand for large res­i­den­tial units, and sell­ing agent Peter Gar­ri­gan says this hold­ing presents an op­por­tu­nity to de­velop a res­i­den­tial scheme of four large five-bed­room homes rang­ing in size from 183 sq m to 235 sq m.

He says: “This prop­erty ben­e­fits from full plan­ning per­mis­sion for the de­vel­op­ment of four large, de­tached five-bed dwellings in an in­ti­mate set­ting.

“We an­tic­i­pate this as­set will ap­peal to both lo­cal and do­mes­tic house builders due to its favourable grant of plan­ning per­mis­sion and the de­mand for dwellings of this lot size.

“Malahide con­tin­ues to at­tract sig­nif­i­cant in­ter­est from home own­ers due to its prox­im­ity to Dublin city cen­tre, sur­round­ing ameni­ties and fa­cil­i­ties in­clud­ing Malahide Cas­tle/ Malahide Ma­rina and the pro­vi­sion of in­fra­struc­ture links in­clud­ing the DART/ M50.”

The most high-pro­file sale in 2017 was GLL’s dis­posal of AIB’s Grafton Street branch build­ing to Ir­ish Life

for a re­ported €50.11m

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