2015 may be another record year for commercial property investment with approximately €1bn of income producing property changing hands in the first quarter alone – an increase of 8% on last year.  However there has been a marked change in the profile of buyers.  

In its latest report, Savills notes that private equity (PE) investors – who were the most active players in the early stages of the recovery – are now re-trading prime assets as they seek to recycle capital.  This is providing the opportunity for institutional investors to access core assets on a long term buy-and-hold strategy.

According to John McCartney, Economist and Director of Research at Savills Ireland, re-trades – combined with portfolio and loan sale break-ups – will ensure a continued pipeline of supply that will enable institutional investors and REITs to further increase their positions in the market;

“The emergence of institutional investors and REITs is a subtle message that Ireland’s economic recovery is real.  These players typically invest for the long-term and therefore their involvement signals a perception that rents and capital values are underpinned by genuine occupational demand.  PE investors seized the opportunity to pick-up distressed assets – particularly offices – at rock-bottom prices in 2012 and 2013. However as the recovery has gained strength, office yields have continued to harden, which has enabled PE buyers to cash-in and move into higher yielding sectors.

“At the same time the institutions and the REITs have become more active and, with longer time horizons and lower funding costs due to quantitative easing – they have been able to out-compete PE for core assets. The upshot of all this is that it will be another busy year for the investment market.”

Between Q2 2012 and Q1 2015, high profile properties that were purchased and subsequently re-traded include:

• One Warrington Place, Dublin 2
• Riverside 2, Sir John Rogerson’s Quay, Dublin 2
• Bishops Square, Kevin Street, Dublin 2
• The Forum, Lower Commons Street, Dublin 1
• New Century House, IFSC, Dublin 1

Meanwhile, the report also notes an upsurge in retail investment, with transactions jumping from €144m in 2013 to over €1bn in 2014.  According to McCartney, with high employment growth and consumer sentiment, the retail recovery is now gaining traction and inevitably this is attracting investors’ attention.