2016 delivers €4.3bn in real estate deals
THE value of commercial property transactions for 2016 is on course to reach €4.3bn — a figure just shy of the record-breaking performance of 2014, when €4.5bn worth of deals were transacted. The estimate for 2016 is contained in the latest analysis from agents Knight Frank.
This year’s performance was driven by three major deals: the sale of the Blanchardstown Town Centre for €950m to Blackstone, the sale of One Spencer Dock to international investment group AGC Equity Partners for €242m and the imminent sale of Liffey Valley Shopping Centre for an estimated €600m to Germany’s largest public pensions group, Bayerische Versorgungskammer.
“Large lot sized transactions are always the litmus test of a market’s liquidity so for three such substantial deals to transact in 2016 is testament to the depth and breadth of the capital base that Dublin is now able to draw from,” said Knight Frank’s investment analyst John Ring.
European buyers accounted for 32pc of spend in 2016 compared to 27pc for the US and 33.5pc for Ireland. Some 4pc of the Irish spend involves Irish REITs whose capital is mainly foreign sourced.
THE level and the nature of activity within Ireland’s commercial real estate sector in 2016 has variously been described as remarkable, substantial and strong by a panel of experts assembled by the Sunday Independent. This is reflected in an expected out-turn of €4.3bn in transactions which Knight Frank’s investment analyst, John Ring, says will have been completed by the end of this year.
The €4.3bn figure contained in the analysis by Knight Frank is significant, coming as it does just two years on from the record-breaking €4.5bn in deals transacted in 2014.
While 2016 is down marginally on that year’s performance in terms of total value, it is arguably more notable and more important for the future prospects of the country’s commercial property sector and the economy as a whole.
A key factor in this regard has been the influx in 2016 of European investors, led in the main by pension funds.
The arrival of these long-term investors and their purchase of prime assets acquired in the crash by private-equity firms on the hunt for substantial, short-term profit is to be welcomed for the stability it will bring to the Irish market.
Provisional figures compiled by Knight Frank show that investment volumes in the final quarter of 2016 reached €1.1bn, a number which Ring believes will put the market on course to reach €4.3bn for the entire year,
Overall activity for 2016 was driven by three large deals: Blanchardstown Shopping Centre, One Spencer Dock and Liffey Valley Shopping Centre (which is expected to be fully transacted before year’s end). Together, these three deals represented 42pc of the total market.
The sale of Blanchardstown Town Centre and Liffey Valley also served to skew the retail market’s share, accounting for over 50pc of the market with offices in second place with 28pc.
However, stripping out the above deals, Knight Frank’s analysis notes the retail sector’s share of the market drops to 24pc while offices increase to 44pc from 28pc.
Multifamily deals accounted for 6pc of the overall market while industrial accounted for 2.1pc, illustrating the difficulty that investors have had sourcing and securing industrial stock, notwithstanding the excellent growth prospects for the sector.
While there was a greater spread of investor interest beyond Dublin in 2016 — particularly for regional shopping centres — investor interest remained concentrated on the capital, which accounting for 86pc of the total spend.
The aforementioned influx of European investors proved to be a significant phenomenon, with 32pc of acquisitions in 2016 being accounted for by this cohort.
The proportion of buyers from the United States meanwhile came in at 27pc in the same period.
Commenting on the growing presence in the Irish market of mainly-European pension funds, Ring said it was “a reflection of the derisking of the Irish property market which has taken place over recent years”.
Irish buyers, for their part, accounted for 33.5pc of the market although this includes a 4pc share from the Irish REITs (Real Estate Investment Trusts) whose capital is mainly foreign sourced.
Asked for his overall assessment of commercial real estate activity in 2016, Ring said: “Large lot sized transactions are always the litmus test of a market’s liquidity, so it’s significant to see three deals as substantial as Blanchardstown Town Centre, One Spencer Dock and Liffey Valley transacting in 2016. And it’s a testament to the depth and breadth of the capital base that Dublin is now able to draw from.
“While the globalisation of real estate capital markets has been a growing trend for some time now, Dublin has benefited more than most from this increase in cross-border investment due to its high-growth prospects in a low-yield world,” he added.
“Furthermore, the host of international companies based here makes Dublin an easy market to understand while the strength of tenant covenant on offer makes it a very comfortable place for foreign investors to allocate funds to.”