Over 1.1 million m2 of modern Dublin office space – equivalent to one-third of the entire office stock in the Irish capital - has traded since the beginning of 2013, according to a research report published by Savills on the second day of Mipim.
In the Central Business District the figure is even higher – a staggering 42% of office space has changed ownership in the last four years.
Over the 2013 to 2016 period, the aggregate value of office investment transactions in Dublin amounted to almost €6.3 bn.
John McCartney, director of research at Savills Ireland, commented: 'Given the nature of our economy, which is increasingly based on technology and business services, office space is a critical factor of production. During the economic crisis office blocks could be picked up cheaply and this caused assets to be traded at a ferocious rate. Now that the economy is back on a strong growth trajectory, the appeal of these assets has widened and core institutions such as pension funds and REITs have become key buyers.'
After very active trading in offices between 2013-2015, and with the construction pipeline only now beginning to deliver new-builds, fewer prime office investment opportunities came to the market last year. Consequently offices slowed from 48% of turnover in 2015 to 34% in 2016.
However, McCartney said that investors will continue to have opportunities to buy income-producing office assets: 'Some of the short-term money that picked-up offices earlier in the cycle is already moving on to riskier and therefore higher-yielding markets and this will give core investors opportunities to buy good buildings as they are re-traded. In addition we currently have around 400,000 m2 of office space under construction in Dublin. Some of this is being developed by institutions who will hold it long-term. But some will become available to investors once it is completed and let-up over the next 18 months.'
Outlook
Looking at the Irish property investment market as a whole Savills said that, while demand for income producing property remains robust, the liquid market created by mass post-crisis deleveraging is a thing of the past. Notwithstanding the continued opportunities for investors to develop their own buildings, to forward-fund developments and to purchase re-trades, more normalised supply levels will see investment settle back to a sustainable €2.5bn-€3.5 bn per annum over the coming years.
Click here to read the Savills Irish investment report
