The Irish investment market enjoyed a very positive year in 2019, with over €7bn invested either directly in property or through company acquisitions and forward commit transactions, according to a new report from Cushman & Wakefield.
An analysis of direct investment sales reveals €4.57bn was invested in the Irish commercial property market in 2019. This figure excludes company purchases such as the acquisition of Green REIT and forward commit PRS transactions.
This represents a increase on the €3.24bn recorded in 2018.Cushman & Wakefield say 2019 saw the market defined by a continuing strong appetite for the office sector, a large upsurge in demand for the residential sector and robust investor interest in Dublin.
The figures indicate that the outturn of 2019 was boosted by a very strong closing quarter, with approximately €2.2bn worth of direct property assets traded in the three month period. The most notable transaction of the quarter was the highly sought-after portfolio of office and PRS assets, the Cedar Portfolio, which was acquired for €530m by American private equity firm, Blackstone.
Another significant transaction in the quarter, was the purchase of the Vert platform comprising 382 residential units at Neptune, Dun Laoghaire, and Emlfield, Leopardstown. Project Vert was acquired for €216.1m by Irish based, Avestus Capital Partners.
The office sector accounted for approximately 42% of spend in 2019, translating to a value of €1.9bn. Dublin absorbed the vast majority of this spend, 94%, most of which was located in the CBD. The other significant office transaction in the year, after the Cedar Portfolio, was Five Hanover Quay, Dublin 2, acquired for €197m by German investment manager, Union Investment.
A total of €1.13bn worth of residential assets transacted in 2019. This compares to just €654m in 2018. With limited standing stock options, Cushman & Wakefield say investors are seeking alternative pathways to enter the undersupplied market.
As such, Cushman & Wakefield say the true strength of demand for residential assets is also evident in the large value of forward commitments which also took place.
The retail sector absorbed 14% of direct capital investment in 2019 supported by an increased volume of stock launched to the market over the past twelve months. Largely contributing to this was Davy Real Estate’s acquisition of St. Stephens Green Shopping Centre for €175.5m.
In terms of location, Dublin dominated accounting for €3.96bn of total turnover in 2019 or 87%. Outside of Dublin, Cork captured 4% of capital invested, approximately €187m.
After a robust 2019, Cushman & Wakefield beileve many of the trends evident in the past 12 months look set to continue in 2020. Robust occupier demand for office space suggests investment into office assets will remain at the forefront of the market.
The lack of residential supply is anticipated to encourage further investment into the Private Rented Sector. However, anecdotal evidence indicates a drying up of available standing stock, therefore, the trend of forward commit transactions is expected to be a key feature in 2020.
Forecasted yield outlook for the Dublin market in 2020 has seen an inward movement of prime yields across the sectors of office and industrial. Prime rents are forecasted to increase across the Dublin industrial and office markets, while prime retail rents remain stable for the year ahead.
Commenting on the market, Head of Investments at Cushman & Wakefield, Kevin Donohue said, "2019 was a buoyant year for the Irish Commercial Property market with over €7bn invested, both directly and indirectly. In terms of direct property investment sales, office and PRS transactions dominated the year, a theme that is likely to persist in 2020. Notably, office yields are likely to harden in the year ahead, on the back of a strong leasing market and a shortage of prime office stock."