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Published in Residential Property on 17/09/2018

€500 Million Invested in Build to Rent Market in H1

#CBRE

CNI Editor reports

 International investors with €5 billion are now targeting the Irish rental sector a new report suggests, which points to “considerable interest” from European, Canadian, UK and US investors.

In a new analysis by CBRE Research of the build to rent sector, which comprises the development of properties specifically for the rental market, the authors note that the sector has been “gathering pace” in the last 12 months, fuelled by economic and demographic fundamentals and “a notable supply-demand imbalance” in the residential rental sector in cities such as Dublin, Cork and Galway.

The build-to-rent sector has come out of nowhere in Ireland; between 2012 and 2017 it accounted for an average of less than 9 per cent of total investment in Ireland. But in the first half of 2018, it accounted for a “phenomenal” 25 per cent of investment, with over € 500 million of residential assets traded in the period. Examples in the sector include Ires Reit’s construction of 68 units at The Maple in Sandyford and Kennedy Wilson’s Clancy Quay development, which will have almost 900 units when completed.

While to date, build-to-rent has been predominantly Dublin based, the report suggests that “as investors get increasingly comfortable with economic and demographic drivers in the Irish market and familiar with the yields prevailing in cities outside Dublin”, we will see more activity outside of the capital.

Given the much publicised housing shortages, CBRE says that build to rent is “clearly not the panacea to Ireland’s housing crisis”, but, when combined with other measures, “it has the potential to deliver scale quickly and provide high quality rental accommodation for the increasing cohort of our population that opt to rent residential accommodation.”

The report also highlights the amount of money that is available to spend in developing the sector further, noting that the volume of institutional equity targeting the residential investment sector in Ireland now exceeds €5 billion, with “considerable interest” from European, Canadian, UK and US investors

Key Highlights of our new report include:

Demand for Build-to-Rent investment in Ireland has been gathering pace in the last 12 months, fuelled by unique economic & demographic fundamentals and a notable supply demand imbalance in the residential rental sector in cities such as Dublin, Cork and Galway

Over 90 residential investment transactions extending to more than €1 million have been completed in Ireland since 2012, with more than half of these occurring between 2014 and 2016 when deleveraging activity was at its peak

Until 2016, residential investment transactions in Ireland were not true Build-to-Rent transactions, with no purpose-built rental stock available to trade

A meaningful improvement in new residential supply is now starting to materialise, which in turn is providing forward funding and forward commit opportunities for investors in this specialist sector of the investment market

Over €500 million of residential investment transactions were completed in 12 transactions during the first six months of 2018 alone – almost twice the annual average volume of residential investments traded in the Irish market since 2012

The volume of institutional equity targeting the residential investment sector in Ireland now exceeds €5 billion with considerable interest from European, Canadian, UK and US investors

85% of Irish residential investment transactions extending to more than €1 million in value since 2012 have been in Dublin although there is now increasing appetite for good opportunities in other cities such as Cork and Galway

Prime residential yields in Dublin currently stand at 4.0% having compressed by 70 basis points in the last 12-month period – a return that is attractive compared to other locations in Europe

Read the full report HERE

REF CBRE/Irish Times