Dublin ranks third out of 31 for real estate investment

Dublin ranked in third place out of 31 European cities for real estate investment despite questions surrounding oversupply picking up in the office market, a report shows.

Lisbon, Berlin and Dublin are considered the best bets in Europe for real estate investment and development next year based on fundamentals in the market and rental growth prospects, according to the 2019 PwC/ULI Emerging Trends in Real Estate Europe report.

Dublin has moved up the rankings – from seventh place last year – because of the rapid expansion of technology companies in the city. Facebook, Google and other technology companies swallowed up 43 per cent of space in the first half of 2018.

One spin-off has been the internationalisation of Dublin’s workforce, the report said, which is behind the take-off of build-to-rent housing.

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“Though local government has been criticised for lack of infrastructure investment, the demand is opening up the city for mixed-use expansion,” the report added.

Stabilised

While office yields have fallen to about 4 per cent for prime assets, Ilona McElroy, PwC Ireland real estate tax leader, notes that rents have stabilised around €700 per sq m.

Additionally, despite being several years into its recovery, Dublin is said to have potential, with sites around the airport and the port tipped for strong growth in logistics.

For Brexit related moves, Dublin, alongside Amsterdam, is seen as offering better value than European locations like Paris and Berlin.

"Investors are becoming more cautious, and investment and development preferences are more and more driven by real estate fundamentals such as the economic growth prospects and health of the local occupier markets," said ULI Ireland chairman John Bruder, who flagged Brexit as a clear example of that.

Nevertheless, London held up well in the report although 70 per cent of senior real estate professionals expect the UK’s ability to attract international to fall following the March 2019 Brexit deadline.

Challenging environment

Against the backdrop of a challenging environment, investors are increasingly turning to asset classes less likely to be affected by the current cycle.

Alternative investment, such as in co-living, logistics and retirement living, are beginning to dominate the intentions of real estate executives.

"The last five or so years has seen a remarkable shift by investors towards alternative real estate, or 'niche' sectors. In part this is clearly driven by where we are in the cycle and the search for income. But it is also a response to the innovation that is disrupting the more traditional sectors and a number of long term trends such as demographics and urbanisation," explained PwC Ireland real estate leader Joanne Kelly.

Germany

Of the top 10 cities in PwC's ranking, Germany remains prominent with Berlin, Frankfurt, Hamburg and Munich still popular.

However, with investments in some of those locations becoming overpriced, cities like Madrid, Amsterdam, Vienna and Dublin are scoring well.

“The survey shows that the ability to balance societal and financial gains will be the next big differentiator for industry players, with investors favouring those that can demonstrate this through all their processes,” Mr Bruder said.