Ireland Investment Market Overview - Research, Overview of 2021 & Outlook 2022 Special Focus - Factors Influencing Capital Flows in 2022 - Knight ...
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Occupier Trends Investment Trends Market Outlook
Ireland
knightfrank.com/research
Investment
Market Overview
Research, Overview of 2021 & Outlook 2022
Special Focus – Factors Influencing Capital Flows in 20222 3
IRELAND INVESTMENT MARKET
OVERVIEW 2021 AND OUTLOOK 2022
€5.5bn €2bn was spent on Irish investment property in Q4, bringing the total for 2021 to €5.5bn. This is the second
highest level of annual investment that has ever transacted reflecting underlying investor confidence in the Irish
economy and property market throughout 2021. Recent global events cast some shadow over how the market
Was invested in 2021, €2bn of which
will perform in 2022.
closed in Q4.
PAGE 3
ECONOMY uu INVESTMENT VOLUMES
Investor demand, while
Ireland’s overall economic position has At a total of €2bn, quarterly investment
expected to be more
gone from strength to strength despite spend was second only to the record level
cautious, is anticipated
the challenging backdrop of the Covid-19 seen in Q4 2019. Investor demand for all asset
to lead to increasingly
pandemic. Employment levels in many categories was strong as the year closed.
competition for prime
key sectors were higher at the end of 2021 assets in 2022, particularly While investment in residential assets made
5.6% 42%
than they were before the disruption in the office, residential up the greatest share of spend in 2021 (39%
started in March 2020. Tax revenues and logistics sectors. was invested in PRS and 3% in student
reached their highest level on record accommodation, bringing the total to 42%),
uu
in 2021 with rising income tax receipts the office sector made up the largest share
With pressures very much on Of total spend in 2021
reflecting the increase in the numbers in Q4 (38%). The industrial sector gained
the upside, inflation is a new was invested in residential means that the current forecast that the
challenge for the economy and investment assets. employed in higher value adding jobs. significantly in 2021 accounting for 18% of
economy will grow by 7% in 2022 is under
markets in 2022. total spend for the year and 28% of Q4 spend.
Consumer spending is back at pre- review, but demand for sectors which are
5 KEY
PAGE 3
PAGE 6 pandemic levels and the export sector drivers of growth are set to remain strong Signs of a recovery in demand for retail assets
continues to excel. and will act somewhat as a buffer for the evolved as the year progressed with retail
TA K E A W AY S
other shocks (such as a rapid increase in parks making up 54% of total investor spend
The quicker than expected reopening
inflation) that are on the horizon. in the retail sector in 2021 and 50% in Q4.
of the economy and a path back to the
workplace are expected to provide an Inflation, now running at 5.6% year
29%
added bounce to an already fast paced on year, will be a key challenge for all
recovery. GDP increased by 13.5% in sectors and households, with the risks
2021 while modified domestic demand increasingly on the upside over the
increased by 6.5%. Developments in the coming quarters, particularly driven by
rapidly evolving situation in the Ukraine the spike in global energy prices. of spend in 2021 was invested in office assets
Investment market turnover Breakdown of investment spend by sector (%)
Investment market
2013-2021 turnover
(€ billions) Breakdown of investment spend by sector (%) Q4 2021 and 2021
2013-2021 (€ billions)
Residential Office Industrial Retail Mixed-Use Other Hotel
Residential Office Industrial Retail Mixed-Use Other Hotel
€395m 54% 2 9%
The largest deal of 2021 was Blackstone’s Of spend in 2021 on retail assets
acquisition of the Serpentine Buildings, was invested in retail parks.
*
which are let to Meta (Facebook), in Dublin
%
28%
42
PAGE 3
18
4 for €395m.
%
%
1
PAGE 4 & 5
9%
38
*
5% 3
8%
%
4%
2021
2020
Q4 2021
2018
2014
2016
2019
2015
2021
2013
3% 2% 1%
2017
Source: Knight Frank Research
Source: Knight Frank Research Source: Knight Frank Research * includes student accommodation4 5
P R O F I L E O F T H E L A R G E S T D E A L S I N 2 0 2 1* B Y S E C T O R A N D I N V E S T O R
OFFICE RESIDENTIAL R E TA I L INDUSTRIAL
€1.6bn was invested in office assets €2.3bn was invested in €285m was invested in retail assets. Just over €1bn was invested in
of which €1.4bn was invested in buildings PRS assets. Investment in retail parks made up industrial assets.
in Dublin 1, 2 & 4 combined. 54% of the overall retail spend.
The largest transaction was Blackstone’s purchase The largest transaction was Union Investment’s The largest transaction was the purchase by Marlet of the The largest transaction was the purchase by GIC of the
of the Serpentine Buildings in Dublin 4 from the purchase of Royal Canal Park, Ashtown, Dublin 15 Parks Collection from Marathon for €74.1m. Exeter Portfolio from the Exeter Group for €285m.
Serpentine Consortium. from Ballymore.
The deal involved the sale of a portfolio of three retail The deal closed in Q4.
The deal involved the sale of four interconnecting The deal involved the sale of a development parks; including Belgard Retail Park Tallaght, M1 Retail Park
1
Grade A office blocks which form part of Meta’s comprising 218 one-bed and 217 two-bed Drogheda and Poppyfield Retail Park in Clonmel. The sale
(Facebook’s) International Headquarters. The deal apartments for €200m. completed in Q4.
was completed in Q4 at a price of €395m.
The deal was completed in Q2.
INVESTOR INVESTOR INVESTOR INVESTOR
The second largest deal was the purchase by The second largest transaction was the purchase by The second largest deal was the purchase by AM Alpha of The second largest deal was the purchase by Palm
Blackstone of the Project Tolka Portfolio from Ardstone of the Dwyer Nolan Portfolio, from Dwyer Nutgrove Retail Park in Dublin 14 from Davidson Kempner. Capital and KKR of the Core Portfolio from Core Industrial
Colony Capital. The sale completed in Q1 at a Nolan Investments. for €195m.
The Retail Park, extending to 180,000 sq ft, includes six
price of €290m.
The portfolio included 401 new build apartments retail warehouse units, a standalone Costa Coffee outlet The deal closed in Q4.
The portfolio included four assets in Dublin 2 and 4: comprising 129 one-bed, 221 two-bed and and parking.
2
50 three-bed units, situated in three North
• 28/29 Sir John Rogerson’s Quay (72% interest) The deal closed in Q3 at a price of €66.3m.
Dublin locations.
• Whitaker Court (72% interest)
The deal closed in Q2 at a price of €181m.
• Block 1, Burlington Plaza (75% interest)
• Block 2, Burlington Plaza (75% interest).
INVESTOR INVESTOR INVESTOR INVESTOR
The third largest deal was the purchase by Deka The third largest transaction was the purchase by The third largest deal was the purchase by Deka Immobilien The third largest deal was the purchase by Stoneweg of the
Immobilien of Riverside IV, Dublin 2. Greystar of Griffith Wood, Marino, Dublin 3. of 26/27 Grafton Street, Dublin 2. Aviva was the vendor. Liffey Business Campus, in Leixlip, Co Kildare.
The building was sold by Irish Life for €164m and The deal consisted of the sale of 342 units from The property was refurbished in 2016 and the retail Extending to 1m sq ft, the scheme consists of a mix of
was completed in Q2. Cairn Homes for a price of €177m. accommodation extends to 981 sq m. & Other Stories has industrial, manufacturing and office space plus 58 acres of
3
traded from the property since 2016 and is one of eight development land.
The deal closed in Q2.
brands within the H&M Group. The deal closed in Q3 at a
It closed in Q2 at a price of €95m.
price of €25.4 million.
INVESTOR INVESTOR INVESTOR INVESTOR
*on market deals that closed excludes transfers between companies6 7
CAPITAL FLOWS 2022* FACTORS INFLUENCING
OUTLOOK
PROFILE OF CAPITAL FLOWS 2021
Cross-border investment has the potential CAPITAL FLOWS IN 2022 2021 Buyer
to reach a new high in 2022 driven by 2021 Buyer
Geo-political Risk, Currency
the strength of the global recovery post EUROPE
& Hedging
Covid-19. However, the yet unquantifiable IRELAND 2021 Buyer
Since the findings of the Active Capital US
EUROPE
impact of war in Ukraine casts a shadow ASIA
Research report were published, the IRELAND
over this potential, with financial and US
Ukrainian / Russian war has changed what
wider market uncertainty set to slow ASIA
was a stable currency environment into
decision making across the globe. The
one of volatility with more uncertainty to
underlying trends identified are that
follow. The US dollar is expected to continue
the US, UK, Germany, France and the
to appreciate due to the uncertainty of this
Netherlands are forecast to be the top
tragic geo-political situation.
destinations for real estate investment
capital, but that is now dependent on how Currency fluctuations will influence pricing REIT 0.5%
OTHER 0.5%
events evolve over the coming months. and asset choices in European and all global
UK
REIT 0.5%
1.
markets over the coming quarters.
Expectations are now subject to 2021 Vendor OTHER 0.5%
UK
considerable risk, but are identified Inflation 2021 Vendor
IRELAND
as follows: Hopes that inflationary pressures would 2021 Vendor
US
• office assets to dominate prove transitory have completely faded UK 8%
IRELAND
Global financial market uncertainty
(> 50% of capital flows) with the trajectory for inflation now clearly US
UK 8% and widespread geo-political risk will
upwards. The rapid pace of war activity in
• logistics assets to see dominate investor decision making
the Ukraine will see inflation spike over
accelerated demand in 2022. Before the crisis in Ukraine,
the coming months, increasing the risk of
• demand for retail and
outward pressure on yields. We expect yield
capital flows were expected to reach
hotel assets to recover
pressures will impact some sectors more
new highs, however uncertainty will
• all sources of capital to seek than others in 2022, (with retail and hotels delay decision making.
residential assets, targeting a the most vulnerable), depending on how REIT
wide geographical spectrum EUROPE
events unfold.
REIT
* Active Capital global research carried out by Knight Source: Knight Frank Research
ESG EUROPE
Frank analyses and forecasts capital flows on an
annual basis. Investor preference for sustainably certified Source: Knight Frank Research
real estate has become firmly established Source: Knight Frank Research
across all major markets, particularly over
2. 3.
the last eighteen months. 2022 is expected to
indicator of asset rotation. Total volumes in
see a continuation of this trend along with
25%
2017 were 11% above the long-term average
increasing interest in asset re-purposing and
and this combined with the fact that assets
refurbishing opportunities.
bought in 2021 could have been held back Ireland is expected to see Industrial assets are expected to see
of total spend was on
Asset Rotation in 2020/2021 due to the pandemic, indicate steady demand for prime assets, accelerated investor demand as a result
five large deals
Based on the assumption of a 5-year hold, that asset rotation will be a key influencing particularly in the office, residential of the current geo-political crisis as
(*excludes €450m Ardstone deal & includes
transaction activity in 2017 can be used as an factor on capital flows in 2022. and industrial sectors, with yield supply chain problems and inflationary
€196m Core Portfolio transaction which was
the 6th largest deal of the year)
tightening expected for assets with pressures highlight the importance
sustainable credentials. of having access to products locally.
TOP FIVE DUBLIN INVESTMENT TRANSACTIONS Q4 2021
Further yield tightening is expected in
PRICE
BUILDING ACHIEVED SECTOR PURCHASER this sector.
(€M)
THE SERPENTINE BUILDINGS, DUBLIN
€395,000,000 OFFICE BLACKSTONE
4
THE EXETER PORTFOLIO €285,000,000 INDUSTRIAL GIC
THE CORE PORTFOLIO €195,000,000 INDUSTRIAL PALM CAPITAL/KKR
ONE & TWO DOCKLAND CENTRAL,
€152,288,000 OFFICE COMMERZ REAL AG
DUBLIN 1
HIGHLIGHT PARKGATE, DUBLIN 7
STUDENT
AND HIGHLIGHT THOMAS STREET, €120,000,000 PATRIZIA
ACCOMMODATION
DUBLIN 8
Source: Knight Frank Research Source: Knight Frank ResearchOccupier Trends Investment Trends Market Outlook
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Market Overview
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The global perspective on
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Occupier Trends Investment Trends Market Outlook
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Ireland Residential
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Investment Market
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TRENDS IN GLOBAL
REAL ESTATE INVESTMENT
Research, Overview of 2021 & Outlook 2022
Special Focus - European Residential Investment
Capital Markets
Market Trends & Insights
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adrian.trueick@ie.knightfrank.com
Peter Flanagan, Director
Active Capital Ireland Residential peter.flanagan@ie.knightfrank.com
2021 Investment Market
Overview – Research,
Overview of 2021 & Ross Fogarty, Director
Outlook 2022 ross.fogarty@ie.knightfrank.com
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