Investor spend in the Irish commercial property investment market in the second quarter of 2015 was split almost 50/50 between Dublin and the provinces, according to new research from BNP Paribas Real Estate.
"This indicates that the market has entered a more mature phase in the current cycle," says Joan Henry, head of research at the agency. "While the sale of prime offices dominated activity in the Dublin investment market in Q2, investors looking for retail opportunities focused on shopping centre assets out of the capital."
Total investment market turnover in Q2 reached €671 million – down 30 per cent on Q1. Some €323 million was invested in the Dublin market and prime offices accounted for 64 per cent, or €207 million, of the total.
The Q2 spend brings investment volumes in commercial property to €1.7 billion at the mid-point of 2015, according to new research from JLL. “This compares to €1.8 billion at the halfway point in 2014, which at year-end was the strongest year ever recorded in investment market history,” says JLL’s Hannah Dwyer.
Ms Dwyer expects the momentum evident in the investment market in Q1 and Q2 to continue into the final two quarters of the year. “There is still a lot of stock from banks that we expect to be released on to the market in the next six months, plus the recycling of assets by some previous purchasers is also likely. If this continues, and demand remains as strong from domestic and overseas investors, it is likely that total volumes for the year-end could achieve €3-€3.5 billion.”
BNP Paribas says the largest transaction in Q2 was Iput’s €80 million purchase of Riverside One on Sir John Rogerson’s Quay in the south docklands.
Nearby, the sale of the quayside 17-19 The Anchorage for €26 million at a yield of just 4.3 per cent is indicative of how much prime yields have tightened. Investors spent just €10 million on Dublin retail property in Q2 and this was spread over six transactions.
"This level of spend in Dublin can be considered unusually low/quarter specific with retail opportunities expected to re-emerge as a key theme over the next year," says Kenneth Rousse of BNP Paribas Real Estate. "The low retail spend was partly due to lack of supply in the capital and partly due to the amount of opportunities that came to market outside Dublin."
Some €348 million was spent on commercial property outside of Dublin in Q2, according to BNP Paribas, with shopping centre sales dominating.
The Cornerstone Portfolio – which included Athlone Town Centre, a stake in Kilkenny's MacDonagh Junction, Gorey Shopping Centre, Tipperary Town Centre, Westside Shopping Centre in Galway and Orwell Shopping Centre in Templeogue – was the largest retail transaction at €117 million in Q2.
The largest office deal outside Dublin in Q2 was for Albert Quay in Cork, which was bought by Green REIT for €58 million. Significantly, some 10 per cent of total market turnover was in the office sector outside of Dublin – which is indicative of a more balanced market nationally.
"Another interesting trend in Q2 is the fact that 55 per cent of the investment spend was by domestic purchasers – with Iput, Irish Life and private Irish investors all very active in the market," says Ms Henry.