Irish investment market registered €762m of transactions in Q1 - Construction Network Ireland - Construction Network Ireland

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Published in Commercial Property on 26/05/2022

Irish investment market registered €762m of transactions in Q1

CNI Editor reports

Despite headwinds in the form of growing global inflation, €761.5m was invested in the Irish property market in the first quarter of the year according to a new report from property advisor, Savills Ireland. Whilst this represents a fall of 38% on 2021’s levels, it remains 9% higher than the ten-year Q1 average of €700m.

Multi-family assets continue to attract the largest investment share in the Irish market, accounting for 31% of investment volumes in Q1, totalling €232.9m. However, the sector’s investment share is being eroded by the growth of industrial and logistics transactions which made up 23% of investment volumes in Q1, its second-largest quarterly market share since our series began. The sector’s average lot size has also increased with these greater investment flows. In the first quarter of 2022 the average transaction was €35.6m, up from the yearly average of €14.6m in 2019. The growth highlights the movement of industrial and logistics assets to be a key component of institutional portfolios and now has an average lot size that meets these buyers’ investment characteristics.

U.S. investors were the largest buying nationality in Q1, contributing 33% of investment volumes. Buyers from the U.S. have been increasing their spending in Ireland, with investment from this cohort totalling €1.4bn in 2021, their second-largest annual investment level on record. Large international funds are increasingly focused on assets above €100m. In 2012 transactions above this level accounted for 19% of total investment levels, but this has exceeded 40% every year since 2018. Dublin is benefiting from a strong tech occupier covenant and buyers that need to deploy capital at scale. The greater number of players and liquidity in the market has brought greater stability and transparency, encouraging more entrants in a positive feedback loop.

Kevin McMahon, Divisional Director, Investment, commented: “We continue to see strong liquidity in the Irish real estate market despite volatility in the global macroeconomic environment and increased financing pressures. The market continues to benefit from a stable domestic economy, beneficial population trends and competitive property valuations compared to our European neighbours. There is a steady pipeline of assets that are currently on sale and a number of deals in the office sector that are close to completion, which will likely buoy investment volumes for the year ahead.”

The quarter’s largest transaction was the sale of a portfolio of three student accommodation assets for in excess of €145.0m, two of which are located in Dublin and the other in Galway. U.S. investment fund Bain Capital sold the portfolio to Ares Real Estate Group for a sub 5% yield. The second-largest transaction of the quarter was Union Investment’s forward funding of Primark’s new distribution centre for €128.7m. The transaction generated interest from multiple buyers and traded at a yield of 3.6%. Forward funding deals are becoming more common in the industrial and logistics marketplace where, like the multifamily sector, investors are using these structures to create their own supply. Rounding off the top three largest transactions of the quarter was Point Square in the North Docklands which sold for €85m.