There was a noticeable shortage of new stock coming to the market in the first quarter of 2013, with most activity by agents including completing deals which had been agreed in 2012, and also preparing new assets for marketing. Over 33 investment property sales completed in the first quarter, with transactions amounting to €350 million. This compares with a turnover of €17 million for Q1 2012, a remarkable increase. However turnover for Q1 2012 was particularly low due to the government's proposal to retrospectively ban upward only rent reviews on existing leases. This had spooked investors and almost halted the investment market in  2011. This issue was resolved in December 2011, however it did take a few months for transactions to complete after this, and hence there was a lull in turnover after it had been resolved. It is evident from the marked increase in turnover that investors have renewed confidence in the Irish market, and there is strong demand from foreign buyers, particularly from the U.S., Germany, the UK, Israel and Australia. 

The top deals completed in quarter 1 included the sale of Bishops Square offices, in Dublin 2 to King Street, a U.S. investor for €65million  providing an initial yield of 9.8%; an off market sale of the A & L Goodbody offices in the IFSC to Irish Property Unit Trust (IPUT) for €57 million / 6.8% initial yield; a further off market transaction of the Irish Airlines portfolio acquired by IPUT  for €58 million / 11% initial yield; the German fund GLL bought 102-104 Grafton Street, which is occupied by River Island and Wallis, for €40 million / 6.9% initial yield; the River Lee Hotel in Cork sold for €24.5 million and an American company acquired the SAP offices in Citywest for €14 million /11% initial yield.

One noticeable and positive change is that a number of Irish funds are looking to acquire here again. This will bring a renewed confidence to the market. An analysis of the turnover figures for the first quarter of the year shows who the buyers were with Private Irish / Irish funds acquiring €165.6million / 49% of turnover; Americans the next largest buyers acquiring €91 million or 27% of market share, and Germans acquired €40 million or 11% of market share. 

Jacqueline Fitzpatrick of Savills commented “there is significant demand from private Irish cash buyers for lot sizes up to €5 million, particularly for well located properties with long term income. The majority of foreign buyers are looking for larger lot sizes and appear to like to concentrate on lot sizes over €20million, however they will look at smaller lot sizes if they are especially attractive. The majority are looking for prime assets with long term secure income, ideally with in excess of 10 years remaining in unexpired terms, upward only rent reviews and no break options. There is a lack of this type of product available on the market and buyers are becoming frustrated with this lack of supply. As a result we expect to see prime yields hardening, however there is a risk that if yields reduce significantly these foreign buyers may turn to more opportunistic markets in Europe.”

In terms of asset classes, the majority of demand is for offices, with 53% of turnover for Q1 in this sector. Investors are chasing well located 3rd generation offices, particularly in Dublin 2, where it is expected prime rents will increase in the next few years due to a shortage of new office developments in the planning pipeline. There is good demand for apartment block sales,particularly where there is 100% ownership of the entire block. Multifamily deals completed in Q1 included the sale of Park Lodge for €9.6 million and we understand contracts have been signed for the Liffey Trust Building for €12.5 million. 

The government introduced a waiver of Capital Gains Tax for a seven year period for properties acquired prior to 31st December 2013, and held for a minimum of seven years. Therefore we expect demand to increase prior to the end of the year, if investors want to avail of this. 

Prime initial yields are currently in the region of 6.75% for offices, 9.0% for industrial, 6.0% for retail high street, and 7.5% for shopping centres.