Turnover from commercial real estate investments amounts to 5 billion euros as the end of the year approaches

Despite limiting factors such as travel restrictions, investment turnover exceeded 3.5 billion euros in the first nine months of 2021. Already in the fourth quarter, transactions of more than 1.3 billion euros have been finalized or are at an advanced stage of negotiation, leading us to project investment turnover of between 4.5 and 5 billion euros over the year. This means it will likely be one of the best three years on record for commercial real estate investing – an impressive result considering we were locked out for the first five months of the year.

Core office, private rental sector (PRS) and logistics assets were the most sought after, underscoring confidence in the long-term outlook for our economy and user markets. Investors are admittedly more selective, but the level of capital seeking to be deployed is at unprecedented levels and is expected to rise further.

Residential is the best performing sector, with nearly 2 billion euros invested since the start of the year and deals worth at least 300 million euros expected to be concluded before the end of the year. ‘year. This is in line with trends seen elsewhere in Europe and we expect to see new entrants to this sector in 2022.

Base offices in the € 20million to € 60million range faced fierce competition, as evidenced by the sale of 8 Hanover which sparked strong international interest and high pricing.

However, we are also seeing increased demand for more core and value-added opportunities. Although ESG is a key consideration, some investors are happy to acquire non-core assets, as long as the price and covenant are attractive. We are seeing new entrants into this space competing with existing buyers.

Activity is also increasing outside Dublin, with new developments in Galway and Cork attracting high quality tenants and buyers.

Retail is showing resilience and increasing its market share, with a certain demand for opportunities in all sub-sectors. The opportunities for well-leased shopping centers are evolving rapidly, with interest mainly coming from domestic buyers. Investors in this space remain selective and caution remains in order with regard to the vacancy of assets. However, as we see increased confidence in the labor market, it translates into the investment market.

Industry and logistics was one of the outstanding performances of 2021. Strong demand is met by limited supply with yields hitting a new low of 4%. Ongoing development in Dublin and the region will provide enhanced options in 2022 and beyond.

Foreign investors have accounted for 67 percent of investments during the year to date. European investors, mainly German funds, are extremely active and we expect to see new entrants next year. Investments by US funds also experienced significant growth, while Asian investments remained limited in 2021, with the exception of some acquisitions of PRS by the Singaporean fund GIC.

Domestically, we have seen increased activity among high net worth individuals amid low interest rates. There is a marked shortage of quality, long-income stocks available to meet this demand. Overall, however, we expect to see more stocks coming to market in 2022 due to the expiration of the seven to ten year holding periods.

Going forward, we expect investors with longer holding periods will continue to seek quality, blue chip assets with good ESG credentials in the PRS, office and logistics sectors. There will also be increased demand for secondary non-ESG-compliant assets from opportunistic investors. Growth of alternative sectors such as data centers, life sciences and healthcare is also expected in line with global trends.

We maintain a positive outlook for the Irish investment market. Ireland continues to prove itself as an attractive location for investment and offers high relative value. Activity is expected to remain strong through the end of the year and next year with demand supported by continued low interest rates.

Michele McGarry, Director and Head of Capital Markets at Colliers. “This will likely be one of the best three years on record for commercial real estate investing.”

Michele McGarry is Director and Head of Capital Markets at Colliers