After one of the best years on record for real estate investment transactions, agents are adopting a positive outlook for 2022, with some believing it could approach the record high of € 5 billion in transactions seen in 2021.
These factors will be the availability of properties for sale as well as keeping interest rates low which will make property yields more attractive than investing in government bonds.
Marie Hunt of CBRE said: “There is every reason to believe that this level of liquidity will occur again in 2022, especially considering the postponement of transactions to the first quarter of 2022 and the fact that the activity of investment was reduced somewhat during the foreclosure phases in the first half of the year. from 2021.
John Moran, managing director of JLL Ireland, expects the level of transactions in the residential investment sector to remain high despite a weakening of the private rental sector (PRS) in the last quarter of 2021. He says the funds continue to be attracted to Irish rentals. Marlet.
“We have identified more than 1 billion euros of PRS agreements which should be signed in the first half of 2022”, he adds.
Moran estimates that PRS represented more than € 2 billion in transactions or 40% of the market in 2021.
“With a rental stock at a record level in the country and attractive yields compared to continental Europe, the sector will remain a healthy choice for investors, both globally and nationally.
“It assumes that we have sound planning and government policies that support the sector,” he adds.
As most PRS investment deals involve term purchases and some see term financing, the industry sees investors as playing a key role in meeting the demand for private and social rental housing.
“The construction of apartments must be funded in advance for it to be delivered. It is a reckless policy to have developers limited to selling ”(apartments on a unit basis), says Moran.
Knight Frank Ireland’s Declan O’Reilly says PRS remains one of the few areas where investors are willing to consider large-scale speculative development and it’s likely we’ll see more term finance deals in 2022.
He also believes the office investment industry will see more large-scale transactions in 2022, similar to Blackstone’s acquisitions of Serpentine Buildings in Ballsbridge and its purchase of controlling stakes in The Burlington Plaza and Three Buildings in the South. city.
They represented a total of € 685 million in two separate transactions.
“Investors continue to have confidence in the office sector given the strong prospects for job creation and rental growth, which means liquidity will be plentiful for top performing properties… This will support values and see returns. prime yields will contract in 2022. “
Among the office buildings currently for sale are One Molesworth Street, which includes The Ivy Restaurant for 140 million euros and Block R Spencer Dock for 110 million euros.
O’Reilly recognizes that the slowdown in office development over the past two years will limit transactions.
High inflation in construction costs is affecting investor demand for office redevelopment opportunities and he therefore expects the performance gap between primary and secondary offices to continue to widen in 2022.
“That said, the renovation of older blocks could see a rebound if the Dublin City Council’s draft development plans requirement for mixed-use development at city center sites and significantly reduced parking supply wins. ground.”
A somewhat different point of view is taken by John McCartney, head of research at BNP Paribas Real Estate, who says that after a high level of completions in 2021 there will be more offices coming in 2022 and he estimates that over the two years up to 4.3 million square feet of office space is nearing completion.
Therefore, he expects the office vacancy rate to increase further next year from its current level of around 12pc.
While office rents have fallen by around 7.5%, from a peak of € 62.50 per square foot before Covid, to around € 57.50 now, he says that with the increase in l supply, rents could continue to fall at about the same rate.
On the flip side, O’Reilly points to active demand for more than 3.5 million square feet of office space as occupants have resumed their housing searches and have also announced new requirements in recent months.
In addition, he considers that the office supply is limited in part because 52% of the development pipeline in 2022 is already pre-committed.
Among the few speculative buildings to be completed next year is Clery’s Quarter (91,500 square feet) to be delivered by Core Capital and Oakmount from Paddy McKillen Jnr. Linders Group and Kennedy Wilson will complete Haymarket House (83,000 square feet) and 20 Kildare Street (64,000 square feet), respectively. In addition, KC Capital will also deliver the Greenside Building which will cover 36,000 square feet.
Other office projects to be completed are two by Johnny Ronan’s Ronan Group Real Estate with the 437,000 square foot Salesforce tower at Spencer Place scheduled for early 2022 and the 367,000 square foot Fibonacci Square scheduled for the mid 2022, both pre-leased to Salesforce. and Facebook respectively.
Irish property investor IPUT also plans to complete its 80,000 square foot tropical fruit warehouse office on Sir John Rogerson Wharf in the spring.
O’Reilly is more bullish on first-class office rents, saying the shortage of premium buildings will mean these will attract higher rents in 2022 and even 2023.
“However, buildings that do not meet these requirements will suffer from an increasingly small target audience and are likely to experience rent deflation,” he warns.
Confidence has also improved in the commercial investment market, as evidenced by the retail parks recently acquired by Marlet and the number of transactions underway.
Michele McGarry of Colliers says: “The retail industry is showing resilience and seeing increased investment, with demand returning certain and interest primarily from domestic buyers. Investors in this space, however, remain selective and caution remains in order with regard to the vacancy of assets. However, we are seeing increased confidence in the labor market translating into the investment market in 2022. ”
It identified six regional centers with combined guide prices of 132.5 million euros that were at the sales agreement stage in mid-December. Four of them are sold by Marathon Asset Management. They include Eyre Square and Corrib shopping centers in Galway city center.
Marie Hunt said blue-chip yields have leveled off and blue-chip supermarket yields currently at 5.5% tend to be higher.
Additionally, Colliers’ retail team has registered occupant demand for up to 867,700 square feet of retail space across Ireland.
On the logistics and industrial sector, John McCartney expects it to continue to be supported by the consumer economy.
While there is a significant amount of industrial space under construction, he expects the market to “comfortably digest the additional space given the current low vacancy rate and the expected high consumption of goods.” .
Marie Hunt says blue-chip industrial yields range from 4% in Dublin to 5% in Cork and 8% for other provincial sites.
IPUT is one of the investors that is growing in this sector, including large units at Quantum Distribution Park, Kilshane Cross, Co. Dublin.