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This Is What A Boom Looks Like: Ireland's €1.85B Property Investment Bonanza

For obvious and painful reasons nobody likes to use the word "boom" in Dublin. But is it time to lose the inhibitions? Investment in Irish property was €1.85B during the first six months of the year with more than €946M having traded during the second quarter.

The cumulative spend for the first six months of 2018 is more than twice the volume traded in the first half of last year, which was approximately €775M.

And there is more to come.

Bolands Quay under construction, April 2018

This year is going to be a record breaker — no doubt about it. Six months in and, according to CBRE data, the property investment scene has recorded transactions worth €1.85B. This compares with the €2.5B traded during the whole of 2017: if the end of year figure for 2018 wasn’t substantially higher, many in Dublin would be surprised and disappointed.

And it is Dublin that is driving the market. There were no less than eight €100M transactions in the first half of 2018, an unusually high number. Prominent among them was Google’s €300M acquisition of the entire 396K SF Bolands Quay development, sold by NAMA. Google will retain the 301K SF office element for its own use.

Asian investors, expected to play a dominant role in the second half of the year, were also active.

Kookmin Bank, the South Korean investment house, bought the 190K SF Beckett Building in Dublin Docklands for €101M, whilst the 99K SF 2 Dublin Landings was offered for sale at an asking price of €98.8M, a net initial yield of 4.5% after a pre-let to WeWork, with Asian investors again tipped to take a keen interest.

The building is being developed by Singapore-based Oxley and local partner Ballymore, and work on-site is due for imminent completion.

The remaining €1B was accounted for by 78 transactions.

The truth is that for many international investors, Dublin is good value. “Investors from a range of jurisdictions continue to be attracted to real estate investment opportunities in the Irish market," CBRE Associate Director for Capital Markets Fiona Kennedy said. "They attracted by buoyant economic fundamentals and the relative strength of occupier market activity as well as comparatively attractive pricing considering yields prevailing in other jurisdictions at present.”

Prime yields, July 2018

Short of the unexpected, there seem no macroeconomic reasons to suppose the flood of investment from overseas will not continue. Data from Cushman & Wakefield show the massive inward flow of overseas capital into Dublin's high-end office market during the first quarter.

Overseas capital accounted for €704.5M of the quarter’s €933M investment
turnover, an impressive 75% of activity, and was particularly active in the higher end of the market.

CBRE said that the recent European Central Bank announcement that interest rates in the eurozone will remain at current levels until at least the middle of 2019 should ensure that the considerable arbitrage between 10 year bonds and real estate yields which has been so supportive of investor demand for real estate over the last few years will remain for some time yet. Prime yields in all sectors remain stable at current rates at the midyear point, it said.

CBRE expects the pattern of investment to change in the second half of the year, with more investors hunting out "alternative" opportunities, whilst others divert from offices and retail to pile into the build-to-rent sector.

A cluster of 10 pending Dublin transactions, all more than €20M each, will mean a €557M flying start to the second half of 2018. 

 These include:

  • WeWork’s office at 2 Dublin Landings in Dublin’s North Docklands, which is guiding €98.8M.
  • A 216-apartment PRS/build-to-rent scheme at Swift Square, Santry, Dublin 9, which is guiding €80M.
  • The Belgrave Collection of 265 apartments in 30 period houses, most of which are in Dublin 6, which is guiding €60M.
  • The former Clery’s Department Store on O’Connell Street, Dublin 1, which is guiding €60M.
  • The Vista office building let to Novartis at Elmpark in Dublin 4, which is guiding €39M.
  • A mixed-use 5.91-acre site at City Block 3 in Dublin’s North Docklands, which is guiding €110M.
  • A 260-acre landbank at Tyrellstown, Dublin 15, which is guiding €45M.
  • The 6.61-acre Techrete site in Howth in north Dublin, which is guiding €25M.
  • A 6.75-acre site at Swords Road, Drumcondra, Dublin 9, which is guiding €20M.
  • A 5.26-acre office site at Eden Plaza, Sandyford, Dublin 18, which is guiding €20M.