_Dublin's office investment market displays resilience despite Brexit
Dublin's office investment market displays resilience despite Brexit
Lifestyle
Although investor confidence in Dublin was initially dented by the UK’s decision to leave the European Union, the Irish investment market had one of its strongest years on record in 2016.
Over €4.4 billion was invested into its commercial real estate, inflated by two significant retail deals. Investment activity has since slowed, with total spend in H1 2017 reaching €776 million.
The office sector held the largest share of transactional volume, comprising 46% of total investment sales. Activity remained concentrated in Dublin with the capital attracting 76% of activity. Prime office yields remained stable at 4.5%.
While investor appetite remains high, Dublin’s commercial property market is facing a shortage of prime assets available for acquisition. Investors have accordingly been moving up the risk curve to suburban locations. This was evident across a range of transactions in the suburban postcode of Dublin 18 and included The Park Office Portfolio in Carrickmines and the former Microsoft office at Building 2 in the South County Business Park.
In response to the shortage of core assets, investors have also turned their attention to forward funding opportunities, demonstrated by Irish Life’s forward-funding of City Quay for €128 million.
Irish investors have continued to be the most active accounting for 68% of the office investment transactions. Despite their small share, foreign buyers from Europe and the US also secured some of the largest lot-sized transactions, including One Grand Parade by German investor Quadoro Doric for €26 million.
The Irish economy will continue to gather momentum leading to strong labour market conditions. Based on employment growth alone, Dublin is expected to require an additional 1.5 million sq ft of office space by year-end. Though a substantial quantum of office space is planned for delivery in the second half of the year, the pipeline will need to sustain at levels which meet pent-up demand and compensate for obsolete office stock withdrawals.
Read the latest Dublin Office Market Outlook Q3 2017
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