Irish property market sees €5.5bn invested in 2021

Over €2 billion was invested in the Irish property market in the last quarter of 2021, bringing full-year activity to €5.5 billion — the second highest level ever recorded — according to research from Savills.

This yearly total was €2.5 billion more than the €3 billion invested in 2020.

“Increasing clarity on the pandemic and accommodative quantitative easing policies provided strong tailwinds to the investment market in 2021 and will continue to provide favourable market conditions for the year ahead,” said Savills.

Kevin McMahon, Divisional Director of Investments at Savills Ireland, said: “Investor appetite has been exceptionally strong throughout the year across most real estate sectors.

“The last quarter of 2021 was characterised by multiple large deals in the office and industrial sectors in particular, accounting for 36% and 27% of quarterly volumes respectively.”

The largest transaction of the last quarter and of the year was Blackstone’s acquisition of a substantial proportion of Meta’s new European campus in Ballsbridge.

The transaction of four buildings for €395 million from the Serpentine Consortium, a syndicate of private individuals and companies, was subject to strong bidding.

“This transaction highlights the depth of capital and confidence international investors have in the office market, despite uncertainty surrounding the pandemic and associated changes such as flexible working practices,” said said Savills.

“This confidence in the sector is well placed.

“2022 is likely to see a buoyant office market as workers return and tenants are able to re-engage with the productivity benefits of the office environment.

“This may have a knock-on impact on construction as supply remains tight in the sector, and there continues to be significant demand for new and efficient space, especially with buildings that meet the growing Environmental, Social and Governance (ESG) agenda.

“Another sector that will likely see a more positive 2022 is the retail sector.

“In the last quarter of the year, there was strong trading as 13 assets exchanged, the largest of which was the Park Collection, a portfolio of prime retail parks sold to Marlet Property Group by Marathon Asset Management for €74m.

“While uncertainty remains as the sector evolves through changing shopping habits, value opportunities are presenting themselves. “

McMahon added: “The multi-family sector outperformed the rest of the market across the year and accounted for 39% of annual volumes.

“In total, €2.1bn worth of multi-family deals took place in 2021, compared to €1.2bn in 2020.

“This sector has remained resilient to the effects of the pandemic and is increasingly funding the delivery of much-needed apartment stock.

“In 2021 the industrial sector’s share of investment volumes has continued to grow, accounting for 18% of the market with the €1bn trading representing a record for the sector.

“Strong macroeconomic fundamentals and expectations of future growth in occupier demand stemming from growing e-commerce sales make industrial assets attractive to investors.

“The sector’s vacancy rate in Dublin has remained at a historic low of approximately 1% throughout 2021. This has backed steady rental growth and supported capital values.”

In the office market, tech and professional services occupiers continue to drive leasing activity, accounting for 34% and 31% respectively of take-up in the fourth quarter.

The two largest deals of the year were carried out in the final quarter — namely KPMG’s 289,000 sq ft pre-letting of Hibernia REIT’s Harcourt Square development and Tik Tok’s 216,000 sq ft taking of the newly completed Sorting Office in Dublin 2.

KPMG exchanged contracts with the landlord Hibernia REIT in December, signing a 20-year lease with 5-year break options, at a headline rent of €57.75 per sq ft.

Savills said KPMG will, however, receive the equivalent of 40 months rent free and an enhanced fit-out; the net effective rent is just over €48 per sq ft.

Shane Duffy, Director of Offices at Savills Ireland, said: “The office leasing market can be summarised by a year of two halves.

“fter a largely dormant first six months of 2021, the office market finally burst into life in the last two quarters with significant leasing activity taking place.

“The final quarter tally of 971,000 sq ft accounted for 64% of the full year’s take-up and brought annual take-up to 1.5m sq ft.

“Overall, market sentiment remains very positive despite the delays incurred in the full return to the office.

“Headline rents have largely held firm, and weekly viewing tallies have grown as the year has progressed.

“The reserved tally at 840,000 sq ft is a strong statement of occupier intentions heading into 2022, with a number of large itineraries actively considering options above 100,000 sq ft. …

“The other market theme to solidify in 2022 is the demand for new ESG accredited office space in Dublin.

“Older buildings now lack appeal for many occupiers, and they risk the potential of becoming ‘stranded assets’.

“Landlords need to be aware of the need to invest in their respective portfolios in-line with occupier expectations.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.