Investment activity in Q3 was limited due to Covid-19 but there are signs for optimism for a strong Q4 given the up-take in activity and new launches since the start of September.
PRS was the stand out sector, accounting for almost 70% of spend. Highlights include the Prestige Portfolio, a portfolio of 317 residential units across four schemes in North Dublin, which was acquired for by Deutsche Bank for €145m. DWS completed the forward fund 368 apartments developed by the Cosgrave Property Group in Dún Laoghaire for a reported €195m. Elsewhere, Park Developments’ Clay Farm in South Dublin achieved region €75m for a scheme comprising of 192 units. Office transactions, primarily dominated by the sale of 30-33 Molesworth Street to Kam-Am, 2 Burlington Road to KGAL and Block 12 Cherrywood to Corum accounted for about a third of spend while pure retail transactions were almost non-existent at just 1% . Dublin was again the focus for investors, attracting nearly 100% of all spend during the quarter.
Forecasts for the short term remain uncertain, fears over a second and indeed third wave of e virus, a tightening of finance, No Deal Brexit still and the possibility of a further economic contraction will shape investor sentiment to some extent. We are noticing that activity among local, domestic investors, generally seeking opportunities of sub €10m has slowed somewhat. Conversely, we are finding that market sentiment amongst more specialised funds, prop. co’s and institutional investors is buoyant and well evidenced in the skew of investment deals during the quarter - deals with lot sizes in excess of €20m accounted for nearly 94% of activity. Many of these participants have carried out fund raising earlier, have mandates to invest and are actively seeking opportunities.
The domestic economy showed a marked recovery going into Q4, having contracted sharply over Q1 and Q2, further recovery is likely to occur over a more protracted timescale. The Department of Finance has “significantly revised upwards its outlook for the economy this year”, although this is largely on foot of the strong performance of the multinational exporting sector. Ireland is now the only EU 27 country to grow goods exports in January to July – our import decline is also the smallest.
On a positive note Q4 looks strong, with some large deals being transacted both on and off market, including Royal Hibernia Way, 1 Harbourmaster Place and One Molesworth Street. Demand remains strong across the PRS, office and logistics sectors, with substantial volumes of capital looking to be deployed by year end. The big question is .. who will buy and how much will they pay. Furthermore, “Colliers have witnessed an array of new buyers looking to enter the market, primarily European, which further boasts confidence in Ireland as player in global Capital Markets.”
There is still optimism for a strong end to the year. There is currently region €1.4bn of investment property available for sale at present with approx. €430m of this either sale agreed or under offer at present.