Irish land sales totalled approximately €99m in Q2 2021, bringing the total year-to-date turnover to €193m, according to new data from property advisor, Savills Ireland. This represents an increase of 15% on the same period in 2020, when turnover reached €167m.
Looking ahead, Savills expect to see several large deals sign by the end of the year, which will drive turnover higher in the final half of 2021. The market for commercially zoned land remains strong, with Savills reporting high levels of interest in the former City Arts site on Dublin’s City Quay (1-6 City Quay). The site, which extends to approximately 0.55 acres, has the potential to accommodate an office development of approximately 142,000 sq. ft., subject to planning permission. The site was offered for sale with a guide price of €35 million, with a number of bids received well in excess of the guide price. As part of this process, Savills also witnessed a number of new funding sources entering into the market, most notably from the UK and the Middle East.
The largest deal of the quarter was an off-market sale in South Dublin, representing a €15 million trade. Another notable transaction was the sale of an 11-acre site on Glenamuck Road, Dublin 18, which traded for €10.5m. The site has full planning permission, granted by An Bord Pleanala in 2020 for a Strategic Housing Development of 197 residential units. This follows on from a deal for a 33-acre site on Glenamuck Road in Q4 2020, which sold for approximately €20 million. There is a third site of approximately 7.5 acres in the area, which has just gone sale agreed.
Another notable sale in the quarter was the M3 Gateway Lands site in County Meath, reportedly traded at a price in excess of €10m. This is an industrial site with the potential for a logistics/distribution hub or data centre. There is currently a dearth of suitable logistics space in Dublin with industrial and logistics space in the capital having a vacancy rate of just 1.2%. This could lead to an increase in demand for greenfield sites with industrial related zoning around the capital in future quarters.
John Swarbrigg, Director of Development Land at Savills Ireland said with strong activity in the residential market in the first half of 2021, it is unsurprising that the majority of the land sold had residential related zoning. It is likely that the strong growth in house prices helped to drive demand for residentially zoned land. In total, they estimate that residential zone land sales accounted for more than 75% of total sales volumes.
“Sites with planning permission have risen in priority in recent years, primarily due to the fact that almost 1 in 3 planning permissions under the SHD process are now going to judicial review. It is promising that the government has finally recognised the inadequacy of the Strategic Housing Development planning application system, however, in the interim certain financiers – and by extension developers – are unwilling to take on planning risk until we have more clarity on the matter. Land with full planning permission has always traded at a premium, but in recent years we have seen this gap widen”.
“Problems with the planning system extend beyond this however with the way in which density requirements are being applied nationwide. Currently, a density requirement of between 35 – 50 units per hectare is being sought across the country, typically closer to the upper end of the scale, in particular by An Bord Pleanala. These requirements are being sought irrespective of what is contained within County Development Plans and Local Area Plans. This density works well in Dublin, and in a small number of urban centres outside Dublin, where most unit types are viable, apartments in particular. However, in many areas outside Dublin, which are of less interest to investors, the need for a significant volume of apartments is in some cases an onerous requirement that is significantly increasing risk and reducing the viability of a development, given the limitations on what an apartment unit might trade for in these locations and the cost associated with delivering them. In a lot of cases, it costs significantly more to build apartment blocks than what they could potentially sell for. This is another contributing factor to the current supply demand imbalance we are seeing in the residential market.
We welcome the abolition of the SHD system in its current form and remain optimistic that a more simplified and accelerated planning process can be quickly developed. The SHD planning process has undeniably contributed to the sluggish response to rising house prices and an efficient planning system will be crucial in solving the housing crisis going forward.”