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Strong demand for 'Alternative' investment in Ireland

Written by Robert McHugh, on 8th Jun 2017. Posted in Financial

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There is increasing appetite in the Irish market for investment in ‘alternative sectors’. This is according to a new report released by Commercial property specialists, CBRE in conjunction with Future Analytics Consulting Ltd (FAC)
 
The ‘Alternative Investment in Ireland’ report focusses in particular on three sectors - Build to Rent (BTR), Purpose-Built Student Accommodation (PBSA) and Healthcare. CBRE and FAC have conducted detailed research into each of these specific forms of alternative investment, exploring the concepts and considering their relevance and sustainability in an Irish context having regard to demand and supply dynamics in each sector.
 
According to the report, the concept of ‘Build to Rent’ is one that is firmly established in many jurisdictions such as the US, where it is now regarded as a mainstream sector offering superior returns to other more traditional forms of investment. Build to Rent has gained popularity in Europe and in the UK in recent years but is as yet only at an embryonic stage in the Irish market. This is about to change as the Irish housing sector becomes professionalised and delivery increasingly supported and realised by institutional capital.
 
The rationale for developing Build to Rent in the Irish market is borne out by the fact that there has been an additional 174,000 households renting accommodation in the last ten year period. According this report, there is potential for an additional 23,300 households entering the rental sector by 2021.
 
Another alternative investment sector that has gained popularity in recent years is student accommodation with several specialist funders and investors focussing on opportunities to invest in student residences, both on and off campus. The purpose-built student accommodation (PBSA) sector, which was once the preserve of a small cohort of specialist providers and third-level institutions themselves, is now moving mainstream.
 
In Dublin’s case, only 13% of the full-time, higher-education student population has access to purpose-built student accommodation. Currently, there are 13 student housing schemes under construction in Dublin, accounting for nearly 4,300 bed spaces between them. In addition, there are 8 student housing schemes with a grant of planning permission accounting for 1,556 bed spaces between them. A further 2,300 bed spaces (net) are at various stages of the planning process, either being reviewed by Dublin City Council or on appeal to An Bord Pleanála.
 
The report also finds that as is the case with all specialist sectors, investment in healthcare offers the attraction of higher yields than more traditional real estate sectors and as a result there has been a notable increase in investors and developers who are focusing specifically on this sector over recent years.

Driven by a dramatic change in the demographic profile in Ireland, a hospital system that is under huge pressure and a general move towards investment in alternative sectors, there has been increased demand in investment in the healthcare sector in Ireland over recent years. This trend is only going to escalate over the coming years as the Irish population continues to age. Indeed, there was a 19% increase in the number of over 65’s in Ireland in the last intercensal period, i.e. between 2011 and 2016.
 
Thirteen percent of the Irish population is now classified as dependent – an increase of 36% within the last decade - and this is expected to increase to 16% by 2026, which is encouraging investors to focus on the healthcare sector. As has been witnessed in other more mature markets such as the US and the UK, the healthcare sector tends to be particularly attractive to more sophisticated long-term capital and investors who have experience in this specialist sector in other jurisdictions.
 
Commenting on the report, Executive Director at CBRE, Marie Hunt said, "The demand for alternative forms of investment has recently started to enter the lexicon in an Irish context as investors lessen reliance on traditional forms of investment and seek to generate higher returns and diversify investment across new geographies and sectors. The fundamentals of the Irish market are very interesting in this respect with several sectors experiencing severe supply demand imbalance."

Source: www.businessworld.ie

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