Another year of record investment levels with €1.25 billion of total investment in emerging PRS market

Dublin, January 18^th, 2019 –

The latest research from Cushman & Wakefield reveals another buoyant year for the Irish investment market, with just over €3.2bn invested across all asset classes in the calendar year.

This is the sixth consecutive year of above trend capital investment across 196 deals, with continuing strong demand for the office sector, a proliferation of activity in the residential sector and a substantial rise in investment flows in the regional centres, specifically Cork.

During 2018, the office sector dominated, accounting for approximately 45% of total investment, translating to a value of €1.4bn. Dublin absorbed the majority of this spend, 88%. Notably within Dublin, investment volumes were highest in secondary and suburban markets, which accounted for €587.6m, a significant rise from €346m in 2017.

The second most attractive asset class in 2018 was the residential sector, which attracted €654.3m, or 20% of investment turnover. This compares to just €110m in 2017. The sector witnessed a rise in both the volume and value of activity. Perhaps most notably however was the increase in the average transaction size from €6.1m to €27.3m. Notably, a further €600m was invested in the residential sector through forward commit transactions.

Commenting on the results, Marian Finnegan, Chief Economist at Cushman & Wakefield, said; "The PRS sector attracted a notable increase in both direct investment together with a substantial volume of forward commit transactions in 2018. With limited PRS standing stock, investors seeking to secure product are using this alternative method to gain a foothold, or increase their existing holding, in the Irish PRS market. If one were to add such transactions to the traditional residential investment figure, it would see the volume of capital inflow into PRS rise to an impressive €1.25bn."

In terms of location, Dublin accounted for 83% of total spend, however the key takeaway in terms of location from 2018 was perhaps the rise in activity in the regional centres. A total of €380.3m transacted in Cork, Limerick and Galway. This compares to €274m in 2017 and just €96m in 2013. Cork is the driving force behind this trend, with volumes up 36% annually. Residential and office transactions account for the largest proportion of spend in Cork, 95%.

The strength of investment in the office sector reflects the overall strength of occupier demand. A total of 260,050 sq m of office space was occupied in the capital in 2018. Driven in no small part by the delivery of new office stock in the city centre, the concentration of leasing activity in the Central Business District (CBD) stood at 64% of overall take up.

Commenting on the office market, Marian Finnegan said; "This marks the fifth consecutive year of take up volumes exceeding the long-run average. Most notably, the underlying strength of demand is highlighted by the level of net take up, a true measure of net new demand and expansion, which achieved a cycle high of 182,850 sq m, and a record high in the CBD."

As anticipated, expansion in the tech sector driven by key players, Google and Facebook, proved fruitful once again in 2018. The social media giant, Facebook, was behind the largest office occupier deal to take place in the history of the state, signing the 14-acre Bankcentre Campus in Ballsbridge during the final quarter. This new international headquarters will result in Facebook’s footprint on the Campus total 80,800 sq m across a number of buildings.

Despite the strength of demand, strong completion levels mean that the market is seeing firmer levels of supply. Availability stood at 466,750 sq m at year end, representing a vacancy rate of 12.6%. However, with over half of this space either signed and reserved at end December, the net vacancy rate declined to 6.3%, while the net vacancy rate in the CBD stood at 5.3%.

Looking forward into the year ahead, with considerably high volumes of space under construction, pre-committed and signed space across Dublin city and suburbs, it’s shaping up to be another strong year for take up. This level of demand is forecasted to drive prime rental growth of 4% for 2019, to €673 per sq m. It will also yield another strong year for investment activity in the office sector. That said, the residential sector will continue to attract a lot of interest from investors, however activity will most likely be led by forward commit transactions.

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 48,000 employees in more than 70 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 $6.9 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.ie or follow @CushWake on Twitter.