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Irish investment market tops €5.5bn in 2021

Written by Robert McHugh, on 10th Jan 2022. Posted in Property

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Over €2bn was invested in the Irish property market in the last quarter of 2021, bringing full-year activity to €5.5bn. This yearly total was €2.5bn more than the €3.0bn witnessed in 2020 and the second highest level ever recorded. 

Property experts Savills say increasing clarity on the pandemic and accommodative quantitative easing policies provided strong tailwinds to the investment market in 2021 and will continue to provide favourable market conditions for the year ahead.

The largest transaction of the quarter and year was Blackstone’s acquisition of a substantial proportion of Meta’s new European campus in Ballsbridge. The transaction of four buildings for €395m from the Serpentine Consortium, a syndicate of private individuals and companies, was subject to strong bidding from a range of parties. 

Savills say this transaction highlights the depth of capital and confidence international investors have in the office market, despite uncertainty surrounding the pandemic and associated changes such as flexible working practices. The property experts say 2022 is likely to see a buoyant office market as workers return and tenants are able to re-engage with the productivity benefits of the office environment. This may have a knock-on impact on construction as supply remains tight in the sector, and there continues to be significant demand for new and efficient space, especially with buildings that meet the growing Environmental, Social and Governance (ESG) agenda.

Another sector that will likely see a more positive 2022 is the retail sector. In the last quarter of the year, there was strong trading as 13 assets exchanged, the largest of which was the Park Collection, a portfolio of prime retail parks sold to Marlet Property Group by Marathon Asset Management for €74m. While uncertainty remains as the sector evolves through changing shopping habits, value opportunities are presenting themselves. Retail parks have performed well during the pandemic, driven by stable demand for electrical goods, furniture, food, and household items. These assets are well located to facilitate returns and click-and-collect orders whilst remaining popular with retailers due to their cheaper rent and large unit sizes. As a result, investors increasingly view them as assets with strong defensive characteristics. 

In the office market, tech and professional services occupiers continue to drive leasing activity, accounting for 34% and 31% respectively of take-up in the fourth quarter. The two largest deals of the year transacted in the final quarter; namely KPMG’s 289,000 sq ft pre-letting of Hibernia REIT’s Harcourt Square development - which is due in 2026 - and Tik Tok’s 216,000 sq ft taking of the newly completed Sorting Office in Dublin 2. KPMG exchanged contracts with the landlord Hibernia REIT in December, signing a 20-year lease with 5-year break options, at a headline rent of €57.75 per sq ft. KPMG will, however, receive the equivalent of 40 months rent free and an enhanced fit-out; the net effective rent is just over €48 per sq ft.

Savills say these deals not only provided a significant boost to the office market at the end of the year, but they also reaffirmed the long-term importance of having a well-located office space as part of a flexible working strategy for large companies.

Commenting on the figures, Director of Offices at Savills Ireland, Shane Duffy said, "The office leasing market can be summarised by a year of two halves. After a largely dormant first six months of 2021, the office market finally burst into life in the last two quarters with significant leasing activity taking place. The final quarter tally of 971,000 sq ft accounted for 64% of the full year’s take-up and brought annual take-up to 1.5m sq ft. Overall, market sentiment remains very positive despite the delays incurred in the full return to the office. Headline rents have largely held firm, and weekly viewing tallies have grown as the year has progressed. The reserved tally at 840,000 sq ft is a strong statement of occupier intentions heading into 2022, with a number of large itineraries actively considering options above 100,000 sq ft."

Source: www.businessworld.ie

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