Social housing expected to attract considerable private investment

There is likely to be "considerable investment" in Irish social housing from private interests – both domestic and international – in the coming years, according to CBRE Ireland.

In a new report, published on Monday, the real estate group said there had been “increased demand” over the past six months, with investors “keen to acquire residential units and schemes let to local authorities on long-term leases”.

This is in line with trends elsewhere in Europe and the UK, where the investment market for public housing is well established, and institutional capital, pension funds, private equity and other specialist investors regularly invest in public housing provision.

To date there have only been a small number of transactions in the Irish market where housing that is leased long term to the public sector has been acquired in bulk by private institutional investors.

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“Until recently, there was no standard leasing mechanism in place to facilitate this form of investment in the Irish market with a combination of approaches being adopted including the standard lease and more recently the enhanced lease,” the report said.

“We believe that over the coming years the trend will evolve, and a myriad of different structures will ultimately emerge, opening up this investment option to new investors.

“Once there is an acceptable conduit in place to enable private investors to invest in the provision of much-needed public housing, we envisage considerable investment in this sector from both domestic and international investors alike.”

Government targets

CBRE said it was “clear” that collaboration between the private and public sector would have a “significant part” to play in increasing delivery of much-needed public housing, and that private sector investment in public housing would help the Government meet its targets.

The increased demand from investors in the sector is attributed to the “long-term secure income stream” guaranteed from a local authority or an Approved Housing Body.

“Investors get the benefit of long-term secure income with little or no day-to-day management, repair or maintenance responsibility, while the local authority or AHB gets access to housing to enable them to reduce their housing lists,” the report said.

CBRE also said it was clear to investors that the new Government was going to “focus heavily” over the next few years on the provision of housing in both the public and private sectors.

“As large-scale investment in social and affordable housing is a relatively new concept for the Irish market, the likelihood is that overseas investors will primarily focus attention on opportunities in the Dublin market,” it continued.

“We believe that investors who are targeting this sector in the Irish market will primarily be looking to acquire a minimum of 50-100 units with a minimum lot size of €15-€20 million. In some cases, the intention will be to build a larger portfolio platform over time.”

Dublin offices

Separately, office take-up in Dublin during the second quarter reached only 9,885sq m, which was the lowest quarterly take-up ever recorded in the capital, according to another report from CBRE.

It noted that many transactions were cancelled or put on hold as a result of the Covid-19 lockdown.

“What a difference a quarter makes,” it said. “Following the second-highest volume of quarter take-up in a decade being signed in the Dublin market during the first quarter of 2020, the second quarter will go down as one of the worst quarters on record.

“In total, only 9,885sq m of office leasing activity was recorded in the second quarter, bringing total take-up in the first half of 2020 to 109,068sq m – down 28 per cent on the same period last year.”