€764m worth of commercial property transactions were recorded in Q1 2022, according to new data from Savills Ireland. Although down 37% compared to this point last year, this turnover remains broadly in line with Q1’s five-year average.
After such a strong end to 2021, Q1’s more muted figures are a consequence of transaction timing rather than any longer-term decline in the market. There is a high volume of deals that are close to signing, in addition to the proposed takeover of Hibernia REIT from Brookfield Asset Management, highlighting the strength of investor sentiment for Irish commercial real estate.
Kevin McMahon, Divisional Director of Investments at Savills Ireland, said: “Investor appetite remains exceptionally strong for well-located income-producing property in Dublin. These assets have come increasingly into focus as greater perceived levels of inflationary risk highlight the positive protection Irish real estate assets provide. There is a sizeable existing group of international investors in the city, that have continued to pursue deals in recent months. These investors have high levels of capital to deploy which will support market sentiment.”
The quarter’s largest transaction was for a portfolio of PBSA assets located across the country in three blocks. The portfolio was purchased by a large U.S private equity fund, further demonstrating the growing internationalisation of Ireland’s commercial real estate market. Union Investments forward fund of Primark’s new distribution centre in Kildare for €129m was the second-largest deal of the quarter. A forward funding deal of such significance underlines the strong sentiment and the increasing importance of such funding structures in the commercial and living sectors. These structures allow investors to enter a tight market while giving developers cost and exit certainty.
The third-largest transaction of the quarter was the Point Square, which was purchased by a private Irish entity for €85m. The mixed-use scheme combines prominent office space and a shopping centre in Dublin’s North Dockland. Point Square provides strong reversionary potential in an area that has undergone transformational change. As a result, the development commanded a significant premium over the asking price.
Kevin McMahon continued: “The living sector commanded 49% of transactions, with PRS, PBSA and social housing assets each registering over €100m+ in the quarter. We expect each of these sectors to have a buoyant transactional year based on long-run demand drivers of sustained population growth and constrained supply. Furthermore, positive yield spreads compared to our European peers and well-established defensive investment qualities in the sector only further promote investor interest.”