The opening three months of the year have returned an impressive €933m in turnover for the Irish investment market. Investment volumes were boosted significantly by three transactions above €100m, which when combined, accounted for over 50% of the total figure.
Compared to the comparable period in 2017 turnover saw a twofold increase, rising from €469.4m. However, in terms of the volume of deals completing, performance remained almost aligned, with 51 deals compared to 53 in Q1 2017.
Commenting on the quarter, Marian Finnegan, Chief Economist, Cushman & Wakefield: “The strength of investment in the Irish market during the opening quarter reflects the positive view of the country’s successful economic performance. Ireland retained its position as the fastest growing economy in the EU in 2017 and short-term forecasts depict further expansion over the coming years. These positive indicators have led to strengthening investor demand both in new asset classes such as PRS, and locations outside Dublin.”
The largest transaction of the quarter was the off-market sale of Heuston South Quarter, Dublin 8. The large office asset was acquired for approximately €175m by an unnamed investor, making it one of the largest single asset office transactions over the past number of years. Other transactions of note include No. 1, Dublin Landings and Chatham & King. No. 1 Dublin Landings, was acquired by Triuva, a German investment management fund, for €164m providing an initial yield of 3.94%. The ten storey office block completed construction in Q4 2017, and has recently been occupied by NTMA who had pre-let the building. Chatham & King is a mixed-used retail, office and residential investment, which also included a forward fund element. The asset was purchased off-market for €155m by US company, Hines.
In terms of sector, the office market has retained its post as the most dominant sector, with robust occupier activity continuing to prove attractive for investors. Absorbing €511.8m, offices accounted for 55% of investment turnover. This total sum was once again driven by the two big ticket items previously mentioned, however with strong occupier activity continuing in the market, a further €172.8m transacted across 18 deals.
Following offices, a sector analysis results in quite a notable shake up in the rankings to what was trending over the past two years. Firstly, mixed-use and residential assets recorded a significant increase in activity during the quarter, absorbing 20% and 14% of turnover respectively. In contrast, retail moved downward, accounting for just 3% of turnover.
Capital targeting residential assets totalled €126.6m, compared to just €10.4m in Q1 2017 while mixed-use assets reached €190.9m. The sizable shift upwards in both asset classes is, in large part, a reflection of the largest deals of the quarter. While mixed-use included the aforementioned Chatham & King transaction, residential included an off-market transaction in Cork for €90m, reportedly The Elysian Building acquired by Kennedy Wilson.
Approximately, €29.7m worth of retail assets transacted in the quarter, with the average lot size sitting at almost €3m. Retail transactions consisted solely of high street/unit shops with no retail park or shopping centre deals taking place in the first quarter.
In terms of location, Dublin saw the largest proportion of capital inflow. However, following regional investment reaching its peak level in 2017 of the past five years, this uplift appears to have carried through into the opening months of 2018. Investment in Cork, Limerick and Galway totalled €190m across 10 deals. This total is inflated by The Elysian in Cork, however, other deals of note included a student accommodation block in Galway, Cuirt na Coiribe, acquired for €35m, and the Plassey Portfolio, Limerick, for €25m.
Lastly, the Irish investment market continues to attract interest from both overseas and domestic investors. Capital from overseas was particularly active at the top end of the market, with investment managers from the US and Europe building on their Irish portfolios. In total, foreign investment accounted for 70% of turnover, with private domestic investors focusing largely on the €1-€10m price bracket.
Commenting on the market, Clive Roche, Divisional Director, Investments, Cushman & Wakefield:
“The Irish investment market continues to perform strongly, however, volumes are somewhat flattered by a number of large transactions which were carried over from 2017. The Dublin office market to continues to dominate, while the PRS sector is witnessing strong investor appetite for multifamily schemes as a supply/demand imbalance persists. While investment demand remains robust, a maturing market has led to a noticeable decrease in the number of available opportunities, with a larger proportion of existing stock now in the hands of long-term investors. Consequently, we are seeing evidence of investors broadening their acquisition criteria, with more now willing to consider forward funding/commitment type arrangements in order to deploy capital.”
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000 employees in more than 60 countries provides deep local and global insights that create significant value for occupiers and investors around the world. In Ireland, the firm has 4 wholly owned offices in Dublin, Limerick, Galway and Cork. Its core services include: agency leasing, asset services, capital markets, facility services, global occupier services, investment management (branded DTZ Investors), project & development services, tenant representation and valuation & advisory. To learn more, visit www.cushmanwakefield.ie or follow @CushWake, @CushWakeIRL on Twitter.