Quarter one 2016 represented another very strong year for commercial property sales in Ireland with €744 million worth of transactions changing hands. While Dublin confirmed its position as the preferred location for commercial investment, accounting for 64% of the market, there was a significant share of transactional activity outside of Dublin which accounted for 36% of the market.
Office assets remain the most desirable asset class as office sales dominated the investment market in quarter one with €349 million worth of transactions accounting for 47% of the investment market. Activity continues to be heavily concentrated in Dublin, with the capital accounting for 99% of office investment transactions by market value in quarter one (€347 million). Office yields remained steady at 4.5%.
International Investors were very active in the Dublin market in quarter one accounting for 59% of office investment transactions, totalling €204 million. European investors increased their holdings in the market in quarter one 2016, supported by strong inflows from Germany and a number of new successful entrants from France. In the largest office transaction of the quarter, German investors, Patrizia, purchased The Oval building on Shelbourne Road, Dublin 4 for approx. €145 million at a yield of 4.09%. The scheme consists of over 180,000 sq.ft of Grade A office space in addition to ground floor retail units and a basement gym and is home to multiple tenants, the largest of which is Avolon Aviation. French investors, BNP Paribas, purchased 8 Hanover Quay for €32 million at a yield of 4.41%. The building will consist of a two storey over basement ‘Grade A’ office building with a floor area of approximately 3,371.74 sq m once completed when it becomes Airbnb’s European headquarters.
Domestic Investors accounted for 39% of Dublin office investment transactions, investing €137 million in quarter one. Hibernian REIT was particularly active, purchasing €97 million worth of investment assets in quarter one. In the second largest transaction of the quarter, Hibernian REIT purchased Central Quay from US Investors, Blackstone, for €51 million. Other purchases by Hibernian REIT in quarter one included the purchase of Marine House and One Earlsfort Terrace in Dublin 2 for €26.5 million and €19 million respectively. Combined, the three transactions accounted for 28% of the Dublin office investment market in quarter one 2016. Blackstone’s sale of Central Quay to Hibernian REIT continues a pattern of re-trading of assets by international funds which became prevalent in the market in 2015. Blackstone had purchased Central Quay as well as the interlinking Bloodstone Building, which was sold for €70 million to Hibernian REIT in quarter four 2015 for €100 million two years previous. In another transaction, Lonestar sold the Blackrock Business Park to Kennedy Wilson for €14.5 million, having purchased it from Ulster Bank as part of Project Achill in 2014. These transactions indicate that many firms are taking advantage of the buoyant investment market and disposing of assets they had purchased at the bottom of the market which has prompted leading REITS and other institutional investors to intensify their acquisitions.
The share of retail investment has grown progressively over the past two years as rental growth starts to appreciate on the back of increasing consumer confidence and retail sales. Quarter one saw capital continue to flow into the Irish retail sector, accounting for 34% or €254 million of overall investment, making it the second most traded asset type in quarter one 2016. The value of retail investments in quarter one was boosted by the largest commercial investment transaction of the quarter, namely the sale of the Whitewater Shopping Centre in Kildare for €180 million. The Whitewater Shopping Centre is Ireland’s largest regional shopping centre extending to approximately 27,870 sq m (300,000 sq ft) of retail accommodation and will include 84 residential units. The shopping centre was sold by NAMA/Ballymore to German investors DEKA at a yield of 6.23%. International investors are becoming increasingly interested in the high yielding nature of Irish retail assets. The second largest retail transaction was purchase of the Golden Island Shopping centre in Co Westmeath by Swiss investors Credit Suisse for €43.5 million. Mixed-use and multifamily asset transactions accounted for 10% (€74 million) and 6% (€46 million), of the market respectively, while industrial asset transactions accounted for 2% of the market. The largest mixed use investment was the purchase of Royal Hibernian Way on Dawson St Dublin 2 for €32 million at a yield for 4.19%.