A busy first half to 2019 sees the Irish investment and Dublin office market reach impressive levels of turnover and take up. According to the latest research by Cushman & Wakefield, approximately €1.7bn was invested in Irish commercial property, while a total of 122,850 sq m of space was occupied in the Dublin office market.
Commenting on the market this quarter, Jonathan Hillyer, Director, Investments, Cushman & Wakefield noted;
“Impressive turnover volumes in the second quarter illustrate the continued strength of the Irish real estate market, with yields remaining attractive. The quarter saw strong demand for PRS assets which is forecast to continue this year and going forward. This combined with a number of large ongoing commercial transactions will likely see an increase on 2018 volumes.”
After a solid opening three months to 2019, the second quarter of the year recorded a turnover of €1.2bn across 40 deals. Considering the top deals of the quarter, unsurprisingly residential assets now dominate transaction activity. The residential market accounts for 35% of the total value spent in the first half of the year, approximately €592.8m
Perhaps the most notable transaction was the residential portfolio titled, XVI. Regarded as the largest transaction of buy-to-let properties to have traded in the Irish market to date, XVI, was acquired by IRES REIT for €285m from US property giant, Marathon Asset Management. The portfolio comprises of several buy-to-let properties primarily in Dublin, with one lot of apartments situated in Harty’s Quay, Cork.
The strength of demand for residential assets is also evidenced by other top deals such as, Heuston South Quarter purchased by Henderson Park & Chartered Land for €220m, a €150m off-market nationwide residential portfolio purchased by LRC Group and Fairways acquired by DWS for €108m, all containing at least an aspect of residential.
Also remaining a dominate feature in the Irish investment market, the office market saw transaction levels reach €505.5m at the midpoint juncture of the year. Leading office turnover this quarter was an off-market portfolio located across Dublin and Cork, purchased by Irish investment manager Bartra Capital with their joint venture partner Henley Investments for €105m.
The driving force behind investment in the office sector is the continuing levels of consistently high tenant take up. A total of 122,850 sq m was occupied in the first six months of the year, an increase of almost 20,000 sq m on the same period last year and reflecting activity levels seen in 2016 and 2017.
The CBD accounts for over two thirds of activity. A total of 83,100 sq m of space was occupied across the five sub-markets, with the South Docks and Traditional Core areas absorbing almost 81% this space.
Commenting on the market, Ronan Corbett, Director, Head of Offices, Cushman & Wakefield stated “Despite some potentially negative head winds, the Dublin office market continues to perform exceptionally well with occupier demand unrelenting. Dublin has become a major global centre for many organisations across a diverse range of industries but with technology dominating. As technology companies become more systemic in the global economy, Dublin will continue to benefit from their growth”.
A breakdown of take up by tenant type reveals the tech and finance sectors continue to be a focal point. The tech sector alone accounted for 47%, or 57,350 sq m of space occupied in the overall market, rising to almost 54% in the CBD. Finance occupiers make up a further 14%, while serviced offices and professional services also feature strongly.
Perhaps a more notable feature of take up is the presence of sub-lets/assignments. The appetite for quality space from large players has seen a rise in the number of occupiers signing large floor plates now, immediately sub-leasing a portion of this, with a view to them occupying the space in full at a later date. The first half of the year saw deals of this type account for 2% of take up, and close to 3.5% in the CBD. However interestingly, sub-lets/assignments account for 7% of overall availability at the end of Q2 (11% in the CBD), indicating their proportion of take up could potentially rise as the year progresses.
Driven by the continued strong levels of tenant demand, construction activity continues at pace. A total of 473,350 sq m of space was under construction at the end of June. This can be broken down into new builds and refurbishments. New builds account for 88% of the space under construction, with total building refurbishments accounting for the remaining 12%.
An impressive 59% of all space under construction was either pre-let or reserved at the end of the quarter, leaving 195,500 sq m net available. This high level of pre-committed space points to the commitment of occupiers to Ireland’s economic story, and a continued strong Dublin office market in the second half of 2019. With the market vacancy rate falling to 10.2% at the end of quarter two, levels not seen since the early part of the last decade, the remaining net available space under construction is welcomed.
After a strong first half to 2019, the investment and office market are anticipated to continue to perform strongly as the year progresses. Take up in the Dublin office market is forecasted to reach 240,000 sq m for the year, with rents sitting at €673 per sq m. In the investment market, persistent investor interest and sentiment leads to expectations of approximately €3bn for year end, with the potential to exceed €5bn if the sale of Green REIT and the Starwood portfolio transact as assets sales.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.ie or follow @CushWakeIRL on Twitter.