Robust investment activity continued in the Irish market during the 2018 summer period. Transactions in the third quarter, July – September, reached over €505m across 46 deals, bringing the year to date total to €2.1bn.
The office sector is one of the dominant stories of the 2018 Irish investment market so far, as occupier activity continues to record robust levels of take up. Accounting for over 50% of capital inflow, approximately €1.1bn transacted in the asset class, with both the total value and volume of deals significantly up on the nine months to September-end 2017.
Dublin is the focus of office investment, however within Dublin, investors are looking to both the CBD and the wider market. In the year to date, just under €518.6m transacted in the secondary and suburban markets.
Office transactions of note in Q3 included Belfield Office Campus, D4, purchased for €90m by Spear Capital; and New Century House, IFSC, D1 purchased by Credit Suisse for €65.3m. Credit Suisse also purchased The Sharp Building, D2 for approximately €56.3m. The office block completed construction the opening quarter of 2018 and is signed to American pharmaceuticals company Perrigo. These transactions also represent the top deals of the quarter.
Commenting on the market, Jonathan Hillyer, Director Investments, Cushman & Wakefield: "The Irish investment market continues to perform strongly. After the buoyant performance of rental growth and yield compression in recent years, the story of 2018 is more one of stability, most notably in the Dublin office market. The combination of this renewed stability and the positive outlook for the Irish economy, will position Ireland well in the international markets.
Notably, now eyes are turning to "value add" or opportunities outside the core, and this is evident by increasing investment spend in both the secondary and suburban Dublin office market and the regional centres."
Outside of the office sector, mixed use, residential and retail assets accounted for 14%, 13% and 13% respectively in the year to date.
Residential investment has been a focus of much attention in 2018. Approximately €268.1m worth of transactions occurred in the three quarters to September-end. A further €203.4m was signed or sale agreed at quarter end, suggesting the sector will see a strong closing quarter. However, it is worth noting that outside of traditional investment deals, the sector has seen a number of forward funding deals also take place, as investors seek to gain a foothold in a market with limited stock.
In terms of location, Dublin accounted for 81% of capital spend in the year to date, accounting for seven out of the top ten largest deals during the time period. However interestingly, and perhaps another key story of 2018, is the progressing pattern of rising regional investment. A combined €326.5m worth of capital was invested in Cork, Limerick and Galway in the nine months to September. This is significantly above the total volume recorded in the regions for 2017 as a whole, of €274m.
Regional investment has been primarily led by Cork, which saw almost €208m transact. This also surpasses 2017 volumes. Investment in Cork is dispersed largely between office and residential assets. Transactions of note include; the sale of the Elysian to Kennedy Wilson for €87.5m in Q1, the off-market sale of The Crescent and The Quadrants, Ballincollig, for €35m in Q3 to a private UK Fund, and the acquisition of City Square, Blackpool, also to a private UK fund for €33m.
Looking to the final quarter, approximately €435.5m was sale agreed at the end of September 2018. This included a number of large transactions such as; The Grange, Stillorgan, signed for a reported €126m, No. 2 Dublin Landings sale agreed for €98m, and the Belgrave Collection, sale agreed for €60m. Close to €1 billion is also estimated to have been available on the market at the end of September.
With this in mind, estimates for year-end turnover suggest volumes reaching between €2.7-€2.8bn, with the potential to reach €3bn if large off market transactions occurred. This will mark a sixth consecutive year of activity above the long run annual average of €1.1bn, and also the 10-year annual average of €1.9bn.
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