Lure Of Solid Returns Fuels Investor Interest In Ireland Commercial Property

The lure of solid returns is fueling investor interest in Ireland’s commercial property market, but supply shortfalls are hampering activity. Prime investment assets are especially scarce, supply is …

The lure of solid returns is fueling investor interest in Ireland’s commercial property market, but supply shortfalls are hampering activity. Prime investment assets are especially scarce, supply is at a five-year low, and the supply to market pipeline is down to a trickle. See the following article from Property Wire for more on this.

Turnover in the Irish investment property market in 2010 is expected to be significantly higher than in 2009 as confidence show signs of improving, it is claimed. The supply of prime assets is at its lowest since 2005 but prime yields are showing signs of stabilizing, according to the latest investment market report covering the first quarter of 2010 from consultants Savills.

‘Turnover for the first quarter of 2010 is estimated to be approximately €50 million. However this could potentially increase to over €500 million by the end of the second quarter due to the level of deals under negotiation,’ said Joan Henry, head of research at Savills.

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The figure for the first three months of the year was expected to be higher but a number of transactions are still under negotiation. ‘Despite the apparent lack of transactions we expect that turnover by the end of quarter two could exceed €500 million made up of approximately 25 individual transactions,’ she explained.

This would compare favorably with the levels achieved in the first six months of 2008 of €441 million for 25 transactions and would be significantly better than the same period in 2009 when 12 transactions achieved €85 million and 12 transactions.

Due to the high returns currently on offer there continues to be significant interest from international investors in investing in Ireland. ‘These parties are typically looking for prime, well-configured assets with secure tenancies and have the ability to transact in relatively large lot sizes. Unfortunately very few transactions have actually taken place reflecting the limited supply of suitable product available,’ said Michael Clarke, associate at Savills.

But he added that investor sentiment has improved noticeably. ‘But activity has been largely confined to secure products with long leases, primarily bank sale and leasebacks, which dominated market turnover figures over the last year with approx. 30 transactions taking place at yields ranging from 6% to 7.25%,’ he added.

Supply is expected to remain scarce in the short term and it is going to remain difficult for investors to source quality investment properties producing secure income. ‘We estimate that the current supply of investment stock on the market which is not currently under offer is in the order of €250 million, which is the lowest level of supply since 2005. Furthermore much of this has been on the market for over 18 months and virtually all of this stock is made up of non prime assets for which there is currently little demand,’ explained Clarke.

‘Virtually no new properties have been publicly marketed over the last six months and the majority of deals that are taking place are arising from off market discussions,’ he added.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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