Record first half sees €3.2bn in property deals, led by Hibernia Reit sale

Commercial real estate continues to lure investors, with office leasing returning to pre-pandemic levels

Hibernia Real Estate Investment Trust’s €1.1 billion sale to Brookfield topped a record €3.2 billion first half for property deals, says a new report.

The private investment firm bought the Dublin-focused office developer in May, making it the biggest real estate deal so far this year.

A report from property dealer Savills Ireland shows that commercial real estate transactions hit €3.2 billion in the first six months of the year, a new record and 17 per cent higher than during the first half of 2021.

However, Savills warns that US interest rate hikes and the prospect of the EU following suit this month are making investors warier of doing deals.

The company notes borrowing costs increased towards the end of the first half as debt markets became more volatile.

Buyers who rely heavily on borrowing will feel the greatest impact, Savills warns, adding that the problem could also hit development, which is already suffering from rising building costs.

On the plus side, the firm says that the Republic and its commercial property market remain in “relatively favourable” positions, with record employment and a rapidly growing economy.

Other deals done during the first half included US-based LCN Capital Partners’ purchase of gambling giant Flutter’s offices in Dublin 4.

Brendan Delaney, divisional director investment at Savills, acknowledges that global uncertainty has made investors cautious.

“In the second quarter we saw strong demand from American investors across all sectors, and Irish-based investors taking a growing portion of investment volumes,” he said.

Meanwhile, rival CBRE says that businesses leased almost 92,000sq m of offices in Dublin during a “solid” opening half to this year.

The property dealers note that more than 118,500sq m of newly built offices in Dublin had been reserved up to the end of last month. Colin Richardson, who wrote CBRE’s report, says pre-pandemic trends are returning to the Dublin office leasing market.

He points out that the report shows balanced supply and demand with much of the new office space due to come on the market already pre-let.

According to Mr Richardson’s report, builders will finish new offices with about 165,000sq m of space by the end of this year.

Of this, 100,000sq m is already fully pre-let or reserved, while many of the remaining projects are partly spoken for.

Businesses are seeking 267,000sq m in offices in the capital, and 80 per cent of that is needed in the city centre, according to CBRE.

Professionals and bankers are responsible for 37 per cent of this demand. CBRE believes that these businesses will continue seeking this space well into 2023.

The firms leasing these offices are broadly positive about their futures, despite various economic challenges, says CBRE.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas