‘Mega deals’ drive growth in investment across Europe

Offices the most popular asset class, accounting for 54 per cent of investment volume

Heuston South Quarter in Dublin 8: one of this year’s most high-value Irish transactions so far was its sale  to an Asian investor for €175 million. Photograph: Matt Kavanagh

Heuston South Quarter in Dublin 8: one of this year’s most high-value Irish transactions so far was its sale to an Asian investor for €175 million. Photograph: Matt Kavanagh

 

New research from BNP Paribas Real Estate claims that investment volumes in commercial real estate across Europe in the third quarter of this year reached €265.2 billion – up 2 per cent on the same period last year.

The most popular asset class is offices, which accounted for 54 per cent of investment volumes. This is up 3 per cent on the same period last year. Investment in retail remained stable on an annual basis, according to the agency, but its share of the investment market continues to fall in line with what is happening in the Irish market.

Much of the growth in investment volumes across Europe is being driven by a rise in the number of “mega deals” (€100 million-plus), which accounted for 44 per cent of the market in Q3.

Kate Ryan, head of research at BNP Paribas Real Estate Ireland, cited a similar trend towards larger lot sizes in the Irish market. “Nine deals worth over €100 million have transacted so far in 2018 in the Irish market compared with just four in 2017,” she said. “While the lot sizes for Irish assets are low in comparison with single deals transacted in other countries, the growing level of investment in high-value assets reflects robust levels of investor confidence in the Irish market.

“Importantly, developers have in recent years responded to modern requirements with newly delivered commercial property meeting the highest standards globally and therefore being more attractive to major international occupiers and investors alike.”

Swap deal

One of 2018’s most high-value Irish transactions so far was the sale of Heuston South Quarter in Dublin 8 to an Asian investor for €175 million (brokered by BNP Paribas Real Estate). Other significant transactions include the sale of 1 Dublin Landings to Triuva for €164 million and an off-market office swap deal between Iput and State Street for €160 million.

BNP found that, after four years of yield compression throughout Europe, prime yields for office and retail properties have now stabilised. But prime yields for logistics are still in significant decline due to its growing popularity as an asset class, which is mainly down to the growth of online retailing.

Kenneth Rouse, managing director at BNP Paribas Real Estate, said that prime office yields in Dublin of 4 per cent represent value compared with London at 3.5 per cent, Paris at 3 per cent and Berlin at 2.9 per cent.

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