Irish Life to re-enter investment market
Ireland’s largest property fund has up to €200m to spend on offices and retail
Turning to the Dublin office market, O’Reilly predicted a “looming scarcity of supply” because there had been no new developments in the past five years. He said there were potential pre-let requirements in the market but these could not be accommodated. He believed that these inquiries would lead to pre-lets rather than speculative developments. Rent levels for prime space had bottomed out at €27.50 per sq ft (€296 per sq m) and were now up to €32 per sq ft (€344 per sq m) but this was still not an economic level to sustain development.
Tenants looking for space would need to be offering €35 to €50 per sq ft (€376 to €538 per sq m), depending on lease terms, covenants and the cost of the proposed sites. Rents were the key to new developments and while he could not say that deals would be concluded in the next three months or six months, he believed it would happen in a relatively short time.
O’Reilly said Irish Life would not be embarking on a speculative development at this point in the cycle but it would consider doing so with a partner prepared to share the risk. However, this would need to be triggered by a pre-letting.
Irish Life’s acquisition priority at this stage is to find good quality office properties in strong locations and with appropriate rent levels. It also plans to look at older buildings in the right locations where value can be added through refurbishment.
The company will also buy in Grafton Street and Henry Street if the right shops become available. Its two funds already own seven property investments in Grafton Street and six in Henry Street.
O’Reilly said that income returns from its property portfolio were running at 8 or 9 per cent. Office values were rising while those in the retail sector had stabilised and rents were under some pressure.
Asked whether Irish Life would consider re-entering the apartment rental market after about 20 years, O’Reilly said that its business model meant it had knowledge and experience of the commercial property sectors but did not have “any appetite or ambition to invest in the residential sector”.