Quarter 1 Property Returns Supports Market Momentum.
The Irish Property Investment market continues to defy the expectations of some of those who feared the worst from the pandemic. The latest MSCI / SCSI Irish index confirms that Irish Commercial Property achieved a total return of 0.6% in the first quarter of 2021, with the Industrial sector achieving 4.7%; the Office sector achieving 0.5% and the Retail sector experiencing a further decline of 1% in the quarter.
Furthermore more than €1.2 billion of investment deals were recorded during the three months of which 59% related to PRS residential investment. The appetite for such residential investment is also reflected in the two PRS portfolios guiding over a billion euro each which were offered to the market during the quarter. This augurs well for Investment deals this year easily exceeding the €3.6 billion achieved in 2020.
Currently yields range from as little as 3.6% for prime PRS standing stock which appear to be underpinned by the rents which Government-backed agencies are willing to pay for social housing as well as the attraction for Institutional investors of such long-term assured income at a time of low to negative bank interest rates.
Despite predictions that remote working would hit demand for offices a further €450 million worth of Offices changed hands as prime rents are down only 1pc since the start of the pandemic according to MSCI.
Dublin offices posted a modest decline in capital values in the first quarter with city centre Offices down 0.7pc and 2.8pc over the 12 months. Dublin suburban offices declined by 2.4pc over the quarter and 8.3pc during the year.
Demand for Logistics space, boosted by online shopping and Brexit, pushed up rents and International investor demand drove down yields. North Dublin industrials benefited most because of ease of access to the airport and Dublin port and consequently values for that area grew 4pc in Q1 and 8.4pc in 12 months. South West Dublin rose 2.7pc in Q1 and 2.6pc in 12 months while South East Dublin grew 3.1pc in Q1 and 3.9pc over 12 months.
Unfortunately Retail continues to suffer most being dragged down by the risk of increased vacancies and reduced rents. Capital values fell by a further 3.2pc on Grafton Street in the first quarter and by 4.7pc on Henry Street and by 2pc for Shopping centres. These latest declines have caused Grafton Street values to fall 26pc since COVID struck while Henry Street values fell an even sharper 30.3pc over the 12 months.
Shopping centres, due to their grocery, suburban, parking and other advantages, fared better with an average 18.6pc fall over the last 12 months.
Author: Donal Buckley
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