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Investment in Irish commercial property surpasses 1bn despite COVID-19 challenges

08/10/2020

According to the latest research by Cushman & Wakefield, a total of €251m in direct investment sales transacted in the Irish commercial property market in Q3.

Despite COVID-19 uncertainty, the solid investor demand also saw a number of forward commit transactions take place, which when combined bring the sum to €680m in the three-month period.

 

In the nine months to September end, direct investment sales total €1.15bn, representing a significant decline on the same period in 2019 where €2.4bn was recorded.

 

Commenting on the market, Kevin Donohue, Head of Capital Markets Ireland, Cushman & Wakefield noted;

“As expected, the summer months witnessed fewer investment transactions due to the fallout created by COVID-19. Investors have taken the opportunity to review their portfolios and as a result a large number of assets have been launched to the market, pointing to a busy year end.”

 

The impact of COVID-19 continues to unfold, while quarter two saw transactions put on hold/delayed, the most recent quarter has witnessed investors’ focus on a flight to quality with transaction activity driven by a strong appetite for prime office assets, particularly those in core locations.

 

Office assets account for approximately €794.5m or 69% of turnover in the nine months to September 2020. Notable Dublin office transactions in the third quarter include the sale of 2 Burlington Road to German investment fund, KGAL, for a price in the region of €94m, and the acquisition of 30-33 Molesworth Street to another German investment fund, KanAm Grund Group, for approximately €60m. The vendor of both office assets was UK property company Henderson Park Capital. Interestingly, quarter three witnessed Henderson Park Capital launch the Bloom Portfolio, comprising a further three prime Dublin offices at St. Georges Quay.

 

Investment in residential assets with a lease/tenant attached, accounted for 11% of turnover in the year to date. Q3 recorded the sale of the Prestige Portfolio to investment manager DWS for a price in the region of €145m. The portfolio represents the largest PRS transaction in the year to date and comprises three schemes under construction and one existing scheme located in Cedar Place, Swords.

 

Despite the hurdles facing foreign investors such as COVID-19 travel restrictions, the attractiveness of Irish commercial property is evident by their continued strong presence in the market. Funds sourced from a foreign investor represented 77% of total turnover in 2020 to date, while domestic capital stood at 16% during the same period.

As the final quarter of the year commences, unsurprisingly, transaction activity in the Irish investment market will be susceptible to the unknown path of the pandemic. In addition to this, the market faces a challenge in the misalignment between vendors and purchasers pricing expectations, market intelligence points towards an unwillingness of some vendors to acknowledge purchasers shifting price parameters. Despite these challenges, market insight anticipates the closing three months of the year to record robust turnover levels with assets such as One Molesworth Street and Royal Hibernian Way attracting keen investor interest.

 

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