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Q2 2022 Capital Markets Quarterly Report

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Total investment turnover reached over €1.2 billion in Q2 2022, bringing turnover for the first six months of the year to €2 billion. In addition to this, the €1.1 billion sale of Hibernia REIT to Brookfield Asset Management closed in Q2. Like the sale of Yew Grove REIT in Q1, this transaction was completed by way of share purchase so is not considered an investment asset sale as such. Nevertheless, between standard transactions and REIT sales, the total spend on commercial property-related deals was over €3.2 billion in H1 2022, exceeding the €2.7 billion invested during the same period in 2021.

Considering asset deals only (excl. Hibernia REIT), residential was the top performer in Q2 with €438 million invested. This was followed by offices which saw €276 million invested. Industrial & logistics attracted €176 million, while investment in retail assets increased sharply to over €150 million compared with just €24 million in Q1.

In line with global trends, there has been increased investment in alternative sectors such as healthcare, which accounted for €78 million of Q2 turnover across 5 transactions. Notable deals included the sale of Ballintaggart House, home to SIMS IVF, to La Française Group for €10.65 million. Colliers acted for La Française on this acquisition and our Capital Markets team are seeing increased investor demand for similar opportunities. Alternative sectors including healthcare are becoming more established in the Irish market, underpinned by excellent growth prospects, so their share of turnover is expected to grow further in the coming years.

Pricing has remained stable and prime yields in Ireland are attractive relative to those achievable in other European peer cities, supporting strong demand and activity among overseas investors. In France and Germany for instance, the prime office yields in major cities like Paris, Berlin and Frankfurt are below 3%. This compares with prime yields of just under 4% in Dublin, where a growing number of global occupiers are opting to locate their European headquarters. European funds from France and Germany alone, including Real I.S., Corum, Sofidy and new entrant Iroko Zen, invested €210 million in Q2 across 8 transactions. These investors are seeking opportunities across various sectors and locations, which demonstrates confidence in the long-term trajectory of the Irish economy and occupier markets.

The current inflationary environment is posing significant challenges for investment markets in countries across the world, including Ireland. The potential for further increases in interest rates will affect the cost of borrowing and this will undoubtedly impact yields and capital values for property assets. Rising construction costs will also need to be borne in mind, particularly in the context of sustainability as certain investors now legally need to consider and disclose how ESG factors are adopted in their decision-making processes. There has already been anecdotal evidence of some transactions being slower to progress or being placed on hold due to changed pricing or cost expectations on either side.

Nevertheless, investor sentiment towards Ireland is positive and the economy is performing well. As demonstrated by Q2 turnover results, activity in the Irish investment market has been very robust, with global headwinds being offset by rising rents, attractive yields and the weight of global capital seeking a limited supply of core, long term investment opportunities in Ireland.


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Q2 2022 Capital Markets Quarterly Report

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