In its latest Irish investment market report, Savills states that there is already €240 million of commercial property in legals or with sales agreed this year, which compares to just €50 million during the same period in 2012. With a further €200 million of stock available and demand expected to gather pace throughout the year, Savills predicts that total investment turnover for 2013 could reach and even exceed €1 billion, which compares to €576 million in 2012.

Domhnaill O’Sullivan, investment director at Savills Dublin, comments: “We expect demand to increase this year as the level of interest in prime office and retail assets in particular will continue. The prices achieved on investment properties sold in 2012, combined with the calibre of purchasers and known under-bidders is enticing fresh capital into the market, which will act as a catalyst to create further competitive tension in the Irish investment market and with it capital appreciation.”

Savills research highlights that demand is expected to remain strong for larger lot sizes with secure income in the office, retail and residential sectors, a similar trend seen in 2012. In addition, Savills predicts that there will also be active interest in the sub €5 million market as private investors seek to take advantage of the capital gains tax exemption that applies to property acquired by the end of 2013 and that are held for a minimum of seven years. However, the firm notes that assets in the €20 million and €50 million bracket will attract the most interest.

In terms of where demand is coming from, Savills states that while private equity investors dominated the Irish commercial property investment market in 2012, this year we will see a shift in the balance as more institutional and core buyers re-emerge for prime assets. The firm also predicts continued interest from US and private Irish investors as well as a return to the market for the Irish institutions that have not been active on the acquisition front for a number of years.

When assessing supply, Savills indicates that institutional vendors who were prevalent sellers in 2012 will be more neutral this year focussing instead on acquisitions. The main driver of supply in the Irish commercial properly market will be the banking sector, which has a continued requirement to deleverage. This will result in more loan portfolios and assets sales coming to the market with prime stock remaining a focus. Savills also confirms that 2013 will see an increase in secondary assets coming to market as banks accelerate their deleveraging process coupled with a break up of loan books.

Fergus O’Farrell, investment director at Savills Dublin, says: “Investment supply in Ireland this year is likely to be focussed on where demand is greatest, namely Dublin offices and prime multi-family investments. While retail activity was limited last year, we forecast a greater supply of high street retail investments in 2013 with a number of regional shopping centres and retail warehouse parks also likely to come to the market.”

According to Savills, the yield gap between prime and secondary in Ireland will continue to widen as yields harden for prime offices, which currently stand at 6.75% for racked rented assets while secondary assets and those in more provincial locations could come under further pressure.