The build-to-rent sector is the most vibrant part of the Irish investment market and has considerable potential for “sustained growth” over the next five years, according to a new report from agent Hooke & MacDonald.
It claims that the sector’s potential is underpinned by strong demand from Irish and international investors, shortage of supply, a rising population and a positive economic outlook.
The agency claims that less than 2,000 apartments were completed last year in Dublin and that this should rise to more than 3,000 in 2019. However, at least 9,000 new apartments are needed in the capital for “years to come” to meet demand, it suggests.
Investment in build-to-rent units amounted to 30 per cent of all transaction activity for 2018 in Dublin, notes the agency, while the figure stood at 40 per cent in the final quarter of 2018, pushing offices into second place. It’s worth pointing out that build-to-rent transactions accounted for just 6 per cent of the overall Dublin investment market in 2016 and 17 per cent in 2017.
The build-to-rent market can, if allowed to expand, provide an important contribution to easing pressure on the rental sector
Hooke & MacDonald suggests 2,380 build-to-rent units were traded last year in Dublin – more than double the 1,101 units sold in 2017 – and that 55 per cent of these were new-builds. Residential investment sales in the capital amounted to a whopping €930 million in 2018, up 185 per cent on 2017.
Top transactions last year included the sale of 372 apartments at Marrsfield Avenue in Clongriffin, Dublin 13, by Twinlite to Tristan Capital Partners; 262 apartments at Fernbank in Churchtown, Dublin 14, were sold by Park Developments to Irish Life Investment Managers; and 274 apartments at The Grange in Stillorgan, Co Dublin, were bought by Kennedy Wilson and Axa Investment Managers.
A number of large build-to-rent schemes are also on the market, including 268 apartments at the Dublin Landings in the capital's north docklands, and 214 apartments at the Fairway in Dún Laoghaire, Co Dublin.
“The build-to-rent market can, if allowed to expand, provide an important contribution to easing pressure on the rental sector,” according to Hooke & MacDonald. It is providing some supply in parts of Dublin that have considerable viability challenges and would not be developed otherwise.
“But the outlook for the build-to-rent sector is very much dependent on building-cost viability issues being addressed by the Government. Although there are already signs of a good increase in planning applications being granted permission for apartment developments, this is only beneficial and relevant if these schemes are viable enough to achieve funding and get commenced.”