Turnover in the Irish commercial property investment market exceeded €1.9 billion in 2013 and is expected to reach €2.5 billion in 2014, according to the latest Investment Market Review and Outlook from Savills.
Activity in the market accelerated strongly in the second half of 2013 and this has continued into 2014, said Savills, with €750 million of transactions agreed or in legals so far in 2014 and an estimated €600 million of stock known to be coming to the market in the short term.
“This figure [€2.5 billion turnover in 2014] could be significantly higher if any of the banking institutions currently holding large volumes of stock were to decide to de-leverage via large portfolio sales,” said Domhnaill O’Sullivan, a director of investments at Savills.
The report noted yields will continue to harden in all sectors as investors look beyond prime assets for value. The wide spread of active investor types meant there was competitive demand in all sectors of the investment market.
“Rental growth will become a more significant factor in investor appraisals as hard evidence of rental growth in the office and multifamily markets continues to accumulate. Prime retail rents also look to have bottomed out. Thus, competition to acquire retail assets such as high street, shopping centres or retail parks will be driven by investors’ expectations of growth,” noted Savills.
International demand for Irish commercial property remains strong, with US investors accounting for 39 per cent of the total spend in 2013. “However,” warns Mr O’Sullivan, “these international investors will face significant competition from domestic institutions such as IPUT, Irish Life, Green REIT and Hibernia REIT who, between them, could have in the region of €1 billion to deploy on Irish properties.”
The report notes there is “really strong competition” for larger lot sizes, with portfolios in the region of €150-€300 million having been actively traded in 2013, with significant competitive bidding. “There appears to be no upper limit to the size of a potential portfolio that could be acquired by investors as they look to avail of economies of scale and build significant platforms in Ireland,” concludes the report.
