A Special Report is content that is edited and produced by the Special Reports unit within The Irish Times Content Studio. It is supported by advertisers who may contribute to the report, but who do not have editorial control.

The main trends in the property rental sector

Industry leaders discuss the biggest trends in commercial and residential property

Purpose-built accommodation is the latest arrival on the rental market scene. Photograph: iStock

Purpose-built accommodation is the latest arrival on the rental market scene. Photograph: iStock


The last number of years has seen great opportunities for investors in the commercial and residential property rental sectors, with current trends set to continue.

Three leaders in the industry discuss some of the biggest trends in this area.

Chief economist at Davy Stockbrokers Dermot O’Leary says commercial property rents are very close to the peak, with a recovery that started in 2013.

“That has coincided with large-scale international funds coming in to buy up these assets, particularly in the Dublin office market and soon after that we got the introduction of the real estate investment trusts (REITs) legislation, then the floating of Green REIT first, then Hibernia. The sector has done extremely well and is very much linked into the fact that there was zero building that happened for four years and as a result of that, vacancy rates went down and rent has boomed. We’re very close to the previous peak in terms of rent now. It’s a very cyclical market and we’re very far along this particular cycle.”

O’Leary says Dublin dominates the investment property market.

“When investors are coming in from international locations, they need scale and obviously Dublin is Ireland’s only city of international scale. The first phase was offices and retail; hotels have been strong as well. Industrial is a sector that investors like but there’s just not enough products for them to buy.”

There is a chance Brexit relocations will prolong the current office cycle. He names Legal & General, JP Morgan, Standard Life, Citadel, Barclays and Bezley as confirmed Brexit relocations.

Investors looking at the residential market are more enthused about the opportunities in that space simply because there hasn’t been a major response in terms of supply, he says.

“At the same time, there is an acceleration in population growth which means the sector is running very hard just to stand still. In terms of that, Cairn came to market in 2015 and was greeted very favourably by investors, then we had another vehicle in the form of Glenveagh, which formally started trading in Dublin in mid-October. That was well over-subscribed,” he says.

‘Solidly performing’

Former president of the SCSI and head of property at Friends First, Claire Solon says REITs have been performing very well, particularly this year.

“What I’ve noticed in terms of REIT performance is that it is quite strongly correlated with the underlying stock market, not necessarily the property market, so because they’re openly traded, you do tend to see the same kinds of movements or trends developing between REITs and the stock exchange that they’re listed on. They have been solidly performing over the last number of years and they’re a good diversifier for a portfolio.”

She highlights another way of getting property exposure, which is indirectly through funds whereby fund managers manage the properties on investors’ behalf and make the investment decisions.

In terms of residential properties, Solon says people should be aware of the Multi-Unit Development (MUDs) Act and owner management companies (OMCs) . These are related to changes in the residential legislative background whereby common areas of buildings need to be owned and managed by the people living there.

“Historically, it would have been the developer’s remit to manage those common areas and it’s an area where people don’t fully understand their obligations as an OMC yet. The Surveyors [SCSI] published material recently about the quality of some of the building stock out there in regard to compliance with fire and building regulations and we certainly have raised concerns. There is no doubt there are a number of properties that are non-compliant and OMCs need to get to grips with that and undertake a survey to make sure properties are safe to occupy.”

Purpose-built housing

Purpose-built accommodation is the latest arrival on the rental market scene, according to John McNally, Director of WK Nowlan Real Estate Advisors.

Hines has major plans for this type of accommodation in Cherrywood while Ires Reit has plans for purpose-built housing that is developed to hold and rent by its owners in Sandyford.

“We have seen big changes in terms of the layout and design of those schemes. They’re designed with the mindset of being held long term and being used for rental and a regular turnover of renters, so typically there would be a different mix of housing, larger apartments for families or smaller open-plan units for co-workers, for example.

“An element of that is purpose-built student accommodation and there is a lot of interest in those from investors at the moment.”

“I’m seeing a lot of fund-type investors in the Irish market looking for opportunities in terms of delivery for the rental market and there are local investors who are active in that space too,” he says.

However, the cost of building apartments in Dublin city is prohibitive, McNally says. The SCSI published a report recently citing a cost of €470,000 to build a medium-rise apartment in Dublin. Given that the typical sale price is about €300,000, they are not viable to build, he says.

“The Society is looking at ways to reduce costs and the Minister for Housing is looking at planning legislation to see what can be done there in terms of increased heights – taking the moratorium off height restrictions and the extra density will improve margins.”

“A lot of the funds have come in and have taken on assets that were distressed and would have worked on them from an asset-management point of view to sell at a future date. Some of these guys are well bedded down now in the Irish economy and have set up offices. They are getting stuck in, to asset manage these and are trying to deliver new accommodation. They are part of the solution,” he says.