Irish investment focus moves to Build to Rent and logistics
The level of investment in Ireland’s commercial property market may have plunged from a record €4.5bn in 2016 to €2.28bn last year, but it’s still motoring along at a not-inconsiderable 30pc above the 15-year average thanks to a booming economy, rising rents and continued low interest rates.
That’s according to the latest instalment of Savills Ireland’s Investment Report, which was released last week.
After four years of “very brisk trading”, Savills notes that many of the country’s major investment properties have moved into stable, long-term ownership, having been sold initially to private equity as part of the disposal by Nama and other financial institutions of large asset and loan portfolios.
Savills notes that one third of Dublin’s office stock, and all six of its major suburban shopping centres, have changed hands since 2013.
But while the supply of investment product is tightening, Savills director of research, Dr John McCartney, says there are still plentiful opportunities for investors to deploy capital in Ireland as private equity owners, who typically target a three to fiveyear holding period, look to exit the Irish market.
He says: “Re-trades of assets bought earlier in the cycle will provide ongoing opportunities for investors.
“These include individual assets and properties which were packaged within portfolios that are now being broken up.
“The speculative development pipeline is also now producing buildings which will be completed, let and sold off as investments,” Dr McCartney adds.
Referring to the growth in opportunities in pre-purchasing and pre-funding of development, he adds: “Either by providing direct funding, or by making development projects ‘bankable’, these forward commitment contracts have facilitated considerable development that would otherwise have been difficult to achieve in a context of very tight bank lending for speculative development.”
While reporting that the office sector remains a popular choice for investors, Savills notes that 2017 saw the emergence of residential and industrial as the sectors of choice.
In the area of residential, Dr McCartney says that the combination of rapidly-rising house prices and restrictive mortgage lending drove an increase of 39,500 in the number of private renters in just 12 months.
With limited residential stock available to deal with the continued surge in de- mand, he notes that investors are increasingly engaging in forward commitments. In this regard, he cites the examples of SW3 Capital and German institution Patrizia, both of which have taken a forward-purchase route at the Cosgrave Property Group’s Honeypark scheme in Dun Laoghaire.
In the area of industrial, and more specifically logistics, Savills notes the sector is becoming ever more popular with investors owing to advancements in technology, which he says are changing the way producers and retailers interact with consumers.
With pricing for logistics units in Ireland still competitive, and with rents rising by 8.2pc per annum, Savills says that there is a considerable weight of capital targeting the sector.