Hopes for a visible sign of recovery in the Irish property market were postponed for at least another quarter in Q2, as still weak demand from tenants for space led to a further 1.8 per cent fall in property values across Ireland.
This comes despite growing optimism regarding the country from local and international investors – who have been eyeing the discounted assets for the last year – and two of the largest purchases seen in the Dublin office market for the last four years, the purchase of Riverside II by a German fund, and Custom House Plaza IV to a private overseas buyer.
P rime office assets in Dublin’s Docklands are predicted to be the first to see any sign of recovery. The area, Dublin’s financial heartland, is already home to over half of the world’s top 50 banks, and half of the top 20 insurance companies. In the last year it has seen a large rise in interest from TMT companies, as notable lettings to Google and Facebook encouraged others to look for space.
The predominantly modern, large assets have been discounted by almost 60 per since the downturn, making them extremely good value, and the recent IPD Global cities report, found that assets in Dublin now offer the highest income return in the world.
“The Docklands area is an established business hub employing over 40,000 people, and continues to be attractive to multinational and local companies. Substantial potential remains with sites available in the area with the benefit of an extensive infrastructure already in place to facilitate immediate development,” explained Ms. Loretta Lambkin, Chief Executive of Dublin Docklands Development Authority.
Nevertheless, values still fell in the Docklands in the second quarter, but by only 0.5 per cent, a considerable improvement on the 1.8 per cent fall seen by the rest of the Irish market.
Colm Lauder, Researcher at IPD continued, “Though Irish property has yet to see any firm signs of recovery, when it comes about, it is likely to follow the same pattern as was seen in the UK, with investors targeting heavily discounted prime assets that can secure strong, long leased tenants, preferably from large multinational companies.
“Dublin’s docklands will tick all of these boxes for investors. Already, we have seen this quarter Ireland delivering higher returns than the UK, for the first time in four years, (0.6 per cent to 0.4). In the Dockland’s that return rose to 1.7 per cent, which is higher even than the return delivered by London City offices, at 1.2 per cent.”
Further promising signs of recovery emerged from the occupier market, where rents have now remained stable for the last two consecutive quarters – despite declines across the rest of Ireland.
Frank Conlon, Head of Property at IDA Ireland commented, “Many of our global clients are in growth mode, which is leading to strong demand for centrally located large office properties of good quality.
“Dublin’s Docklands Area in particular is witnessing a revival with much of the office interest in the city focused on it. The area affords our clients a strong international and flexible talent base, particularly with financial service and digital media skills, and which has a proven transport, utility and social infrastructure.”
“Investors are going to be extremely discerning when looking at Irish property, but the recent sales in the Docklands area, combined with an apparent stabilisation of rental values, are the first signs we have had in the last four years that money is willing to flow back into the market, and that investors are keen to take advantage of the good value Ireland offers”, continued Lauder.
Roland O’Connell, President of the Society of Chartered Surveyors Ireland, concluded, “The Docklands benefitted from having ready to go sites when there were next to none available in the traditional office core during the last development phase, and now competes on an equal footing with the traditional core.
“Demand remains good, with Facebook recently leasing the final floor in their Hanover Quay building and the Central Bank announcing their intention to relocate to the North Quays. The area has proved to be attractive to both local professional firms but especially international financial services and TMT sectors.
“But while availability is good today, a shortage of quality space is on the near term horizon, and unless finance becomes available for new development, both here and in the traditional core, Dublin’s ability to cater for job creating investment from these sectors will be damaged.”