Dublin bucks de­cline in Euro­pean com­mer­cial prop­erty mar­ket deals

Irish Independent - Business Week - - Commercial Property - Ron­ald Quin­lan

THE rapid growth of the Dublin’s Pri­vate Rented Sec­tor (PRS) helped Ire­land’s com­mer­cial prop­erty mar­ket to buck the slow­down in trans­ac­tions recorded across Europe in the first half of this year.

That’s ac­cord­ing to the lat­est re­port on Euro­pean in­vest­ment ac­tiv­ity by real es­tate data firm, Real Cap­i­tal An­a­lyt­ics (RCA).

While the re­port shows trans­ac­tions with a to­tal value of €109.8bn were com­pleted across Europe in the six months to the end of June, the fig­ure rep­re­sents a 19pc de­cline on that recorded in the same pe­riod last year. High prices were among the fac­tors that led in­vestors to scale back their di­rect prop­erty ac­qui­si­tions, RCA says.

Ac­cord­ing to its re­search, no sec­tor es­caped the slow­down, which af­fected 14 of Europe’s 20 most ac­tive na­tional mar­kets. Sov­er­eign wealth funds ac­counted for 0.2pc of Europe’s to­tal in­vest­ment vol­umes in the first half, com­pared with a 4.5pc share for the whole of 2017.

That neg­a­tive trend didn’t ex­tend to here how­ever, with RCA re­port­ing that trans­ac­tion vol­umes in the Ir­ish mar­ket grew sub­stan­tially in the first half from a year ear­lier, fol­low­ing a surge in the pur­chase of rental apartment blocks in Dublin.

The largest of these PRS deals was AXA IM Real As­sets’ €161m pur­chase of The Grange and four acres of ad­ja­cent de­vel­op­ment land in Stil­lor­gan, through its pri­vate rental sec­tor (PRS) joint ven­ture with Kennedy Wil­son.

Other ma­jor PRS trans­ac­tions in the first half of this year in­cluded Ir­ish Life’s ac­qui­si­tion of 262 apart­ments from Park De­vel­op­ments at Fern­bank, Church­town, Dublin 14 for €138.5m; Carys­fort Cap­i­tal’s deal to buy the 120-unit Six Hanover Quay de­vel­op­ment from Cairns for €101m and IRES Reit’s ac­qui­si­tion of the 128 apartment Hamp­ton Wood scheme in Fin­glas, Dublin 11 for €40m.

The Nether­lands mean­while was Europe’s fourth most ac­tive mar­ket in the six-month pe­riod to the end of June, ac­cord­ing to RCA, with €9.8bn of trans­ac­tions, a 17pc in­crease from the same pe­riod in 2017. A ma­jor driver of ac­tiv­ity in the Dutch mar­ket was the res­i­den­tial rental sec­tor.

This fol­lows rules in­tro­duced in July 2015 that oblige hous­ing as­so­ci­a­tions to fo­cus on lower-in­come so­cial hous­ing, prompt­ing their with­drawal from the free-mar­ket rental sec­tor. A hous­ing short­age and a boom­ing home sales mar­ket have at­tracted in­vestors to the sec­tor.

Other ac­tive Euro­pean mar­kets in­cluded the Por­tuguese cap­i­tal, Lis­bon, which jumped to 13th place from 53rd in 2017 as a re­sult of some larger deals, in­clud­ing Black­stone’s port­fo­lio sale of a re­tail park and two shop­ping cen­tres to Im­mochan for a to­tal of more than €400m.

Europe’s two most-ac­tive mar­kets, the UK and Ger­many, recorded de­clines in in­vest­ment vol­umes of 11pc and 31pc re­spec­tively in the first half. The pair ac­counted for 48pc of to­tal in­vest­ment ac­tiv­ity in Europe.

Com­ment­ing on the over­all per­for­mance of the Euro­pean com­mer­cial prop­erty mar­ket, Mr Leahy said: “These are the weak­est in­vest­ment lev­els by sov­er­eign wealth funds since 2010 and they were not alone. RCA’s data for the first half show that most ma­jor sources of cap­i­tal were less ac­tive and US-head­quar­tered in­vestors as a group were net-sell­ers. Our in­di­ca­tors show that pric­ing in the core West­ern Euro­pean mar­kets is well above the pre­vi­ous peak, reached in 2007.”

With RCA’s re­search in­di­cat­ing that some €33bn in deals are pend­ing com­ple­tion across Europe, the sec­ond high­est pipe­line of po­ten­tial deals it has recorded, Mr Leahy said he ex­pects to see an im­prove­ment in the per­for­mance of the Euro­pean mar­ket.

He said: “We should see an im­prove­ment in the sec­ond half of this year, although it’s very un­likely that we shall see a re­peat of the record fi­nal quar­ter of last year.

“Real es­tate con­tin­ues to ap­peal to gen­er­al­ist in­vestors, who are look­ing for in­come-pro­duc­ing as­sets. Prop­erty is ex­pen­sive in core mar­kets in his­tor­i­cal terms, how­ever, so in­vestors will have to fo­cus on adding value through as­set man­age­ment or tar­get­ing mar­kets and sec­tors where rental growth prospects are good.”

An artist’s im­pres­sion of the pro­posed ‘Project Wa­ter­front’ scheme in Dublin’s Dock­lands. Joint agents Sav­ills and Cush­man & Wake­field are guid­ing a price of €120m for the 4.6 acre site

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