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Irish CRE investment market starts the year on strong ground

Written by Robert McHugh, on 1st Apr 2015. Posted in Ireland

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The continued broadening of the investor pool active in Ireland’s CRE market reflects the stabilisation of the market and the removal of the risk premium that was applied to Ireland by core overseas investors for some time according to Davy Stockbrokers. 

They believe that the the expansion of activity from core investors - such as Credit Suisse, Hines Global REIT, Irish Life REIM, Starwood Mortgage REIT and Union Investment – reflects the recycling of shorter-term capital to more patient long-term money. Capital values are set to breach the €10,000 per square metre (€930 per square foot) for the first time since 2007 in Q2 as further core properties are set to come to market. 

While the data released on Dublin’s office market suggest a slowdown in activity in Q1, they remain positive on the full year outlook as a large number of requirements active in the market have yet to be fulfilled and the FDI pipeline remains strong.

They reference data from JLL reported in this morning’s Irish Times which suggest that the Irish CRE investment market got off to a solid start in Q1 2015 with just over €1bn of real estate traded.
Two portfolios in excess of €200m traded (including a Dublin office portfolio from Lone Star to Starwood Mortgage REIT for €350m).

Davy's believe that this reflects the broadening of the investor base active in Ireland's CRE market, overseas investors represented 80% of activity; 95% of investment targeted properties in Dublin, while 93% went to offices, 4% to retail and the residual to mixed-use.

Union Investment’s acquisition of Facebook’s European HQ at 4 & 5 Grand Canal Square, Dublin 2, drove capital values to €9,968 per square metre (€926 per square foot) – a new record this cycle. Reflecting this increase in capital values, CBRE reports in its April yield sheets that prime Dublin office yields compressed by 25bps to 4.75% in March.

Furthermore, Dublin’s office market, take-up totalled 31,578 square metres (339,901 square foot) across 45 deals. Reflecting the supply/demand imbalance in the city centre markets, the suburban markets attracted 56% of take-up activity, while six of the ten largest deals in the quarter were in the suburbs.

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