INVESTMENT
REPORT
Q3
2023
Investment Q3 2023 Report02
In Q3 2023, price adjustment and o-market transactions continued in the
investment market. It was notable that there were no PRS deals completed
in the three months and encouragingly, oces remained resilient
accounting for 40% of the total turnover. Regional shopping centres and
retail parks, as well as industrial property, experienced good levels of
activity.
Q3
2023
>€14.8m
Average Deal Size
Over €1m deals
€81m
George’s Quay House, Dublin 2
Largest Deal
70%
O-Market
30
Deals
67%
Dublin
€444m
Turnover
Arrows represent quarterly trends unless otherwise stated.
Lisney Commercial Real Estate 1
While just after the end of Q3, Budget 2024 in early-October
is worth noting. There were no direct changes to commercial
real estate (such as stamp duty rates) but the review of the
structure of funds (launched last year) continues and may
impact how property is held in the future.
Global Economic Backdrop
The global economic landscape continued to have a weighty
impact on the Irish investment market in Q3 2023 with elevated
ination and even tighter monetary policies around the world
aecting commercial real estate values and liquidity.
Investment Q3 2023 Report2
Activity
Irish investment market turnover reached €444m across 30
transactions in Q3 2023, bringing the total for the rst nine months
of the year to €1.4bn. It was about half of the ten-year quarterly
average turnover gure but considering the challenging global market
conditions, this was anticipated.
€0
€10
€20
€30
€40
€50
€0
€1,000
€2,000
€3,000
€4,000
€5,000
€6,000
€7,000
€8,000
Q1 2013
Q3 2013
Q1 2014
Q3 2014
Q1 2015
Q3 2015
Q1 2016
Q3 2016
Q1 2017
Q3 2017
Q1 2018
Q3 2018
Q1 2019
Q3 2019
Q1 2020
Q3 2020
Q1 2021
Q3 2021
Q1 2022
Q3 2022
Q1 2023
Q3 2023
Average Lot Size, Millions
12-Month Rolling Turnover, Millions
Retail Offices Industrial PRS Other (Incl. Mixed-Use) REIT Sales Average Lot Size
Quarterly 12-Month Rolling Turnover by Sector & Average Lot Size (Q1 2013 – Q3 2023)
Source: Lisney
Almost 15 months into interest rate increases, the 12-month
rolling turnover gure was €2.16bn at the end of September.
This is the lowest it has been since Q4 2013, albeit Q4 2017
was close.
Dublin remained the busiest location for investment,
accounting for two-thirds of turnover. This was followed by
Cork and Louth, at 7.6% and 6.5% respectively, while portfolios
across multi-counties made up 16.7% of the turnover. O-
market sales continued to dominate the market, making up
over 70% of total turnover in the quarter and 56% in the rst
nine months of the year.
International investors, particularly private capital and French
SCPI (Société Civile de Placement Immobilier - a real estate
investment company) investors, remained the most active in
the market. These investors are particularly active across the
traditional oce, retail and industrial sectors for assets where
returns are between 6% and 8% with lot sizes of less than
€40m.
Demand from private investors for assets priced up to €10m
remained good in Q3. At the lower end of this range, between
€1m and €5m, activity was strong with 14 deals (out of 30)
within this bracket, averaging €2.3m each. This is in line with
longer-term trends where, over the last ve years there were on
average 12 transactions in this lot size completed in the third
quarter of the year. Demand for such assets is driven by little
or no return being made on cash in deposit accounts, elevated
ination in the economy and the reduced reliance on third-
party nance for purchasers in this lot size.
While there are pockets of liquidity across sectors and lot sizes,
the biggest gap in recent months remained for larger oce
schemes, generally over €50m in price. It is no coincidence
that this is also where the biggest mismatch appears to be
between buyer and seller price expectations.
Lisney Commercial Real Estate 3
€427m
In the nine months to the
end of September 2023,
a combined total of just
€427m (10 deals) was
concluded in PRS deals.
“
”
PRS
The market conditions that have helped the PRS market
thrive in recent years have weakened. The upward
movement in interest rates has eroded the premiums that
PRS block values yielded over break-up values (the sale
of individual units). Demand has been particularly hit for
existing schemes up to €30m that are older and/or in
fragmented ownership. For new schemes where forward
commitments are required, elevated inflation, construction
costs, rental growth caps and softening yields are making
viability difficult. In many cases, developers have turned
their attention to approved housing bodies (AHBs) and the
Land Development Agency (LDA), which continue to have an
appetite to buy in bulk.
There were no PRS investment sales, either existing stock
of forward commitments, in Q3 2023. Since PRS became
a part of the Irish market in 2012, there has only been
one other quarter where there were no PRS sales, which
was eight years ago in Q3 2015. Since 2015, the quarterly
average turnover in the sector has been €310m. However, in
the nine months to the end of September 2023, a combined
total of just €427m (10 deals) was concluded.
OFFICES
Investment in the office sector has been slow to recover to
its pre-pandemic levels with turnover in the sector at just
€307m in the first nine months of the year. Investor demand
has been impacted by changes in the occupational market,
especially adjustments in the tech industry and continued
hybrid working. Demand for the sector is also greatly
impacted by the EU Taxonomy Regulations on purchasing or
funding properties, particularly around buildings with BER
ratings of B3 or lower.
In spite of the above, the sector regained some momentum
in Q3 2023 and at €175m accounted for 40% of the total
activity. The average transaction size was €35m. This
included the largest deal in Q3; the sale of George's Quay
House in Dublin 2, which was acquired by French investor,
Corum Asset Management, for €81m (NIY approx. 6.24%).
Corum Asset Management has also acquired Building F1,
The Campus in Cherrywood for €33.4m (NIY 6.15%) in Q3.
A private Irish investor acquired 73-83 Lower Mount Street,
Dublin 2 for €31m (NIY 6.95%). J5 Plaza in Finglas was
sold to Iroko Zen in an off-market deal for €18.1m while 4
Earlsfort Terrace was acquired by a private Irish investor for
€11.85m (NIY 5.97%).
INDUSTRIAL
The industrial sector has experienced strong demand
both from occupiers and investors since the onset of
the pandemic and has made up 14% of investment
market turnover. While demand remains for good quality
opportunities, many investors are now a little more cautious.
Sustainability and energy use are coming into greater focus
in this sector.
In Q3 2023, the industrial sector accounted for 19% of the
total market turnover with a spend of €86.3m across eight
transactions and an average deal size of €10.8m. Over the
first nine months of 2023, just under €250m was spent on
industrial assets with an average transaction size of €166m.
The largest industrial transaction in Q3 was Palm Capital’s
off-market acquisition of two premises in Dublin – Unit
D1 in Airport Business Park, Swords and Unit 1A & 1B in
Rosemount Business Park, Dublin 15. At €40.75m, this
accounted for over 47% of industrial activity in the quarter.
Units A & B in Willsborough Industrial Estate, a data centre
investment, was also sold in an off-market transaction,
for €10m. Other notable deals included the sale of 35
Rosemount Business Park, Dublin 15 to Pictet for €14.175m
(NIY 5.6%), Units 35 & 38 in Fonthill Industrial Estate for
€10.1m (NIY 4.6%) and Unit 20 in Fonthill Business Park for
€6.6m (NIY 5.75%). The remaining three deals were each
sub €2m.
Activity By
Asset Type
Investment Q3 2023 Report4
RETAIL
Investor interest in retail assets continues to be mixed.
Interest that is present is price sensitive and generally
focused on well-performing regional shopping centres and
retail parks where vendor and purchaser pricing is aligned.
In Q3 2023, the sector had another relatively busy quarter
with €146.46m invested across 13 deals, one-third of all
market activity. The average deal size was €11.3m. O-
market transactions also dominated this part of the market,
making up nearly 60% of the sector’s activity. Shopping
centres accounted for 75% of the sector’s activity and the
largest deal was the o-market sale of the Hexagon Portfolio.
This comprised six regional shopping centres (Donaghmede
Shopping Centre in Dublin; Letterkenny Shopping Centre in
Donegal; Galway Shopping Centre; Laois Shopping Centre
in Portlaoise; Parkway Shopping Centre in Limerick, and
Longwalk Centre in Dundalk, Co Louth) and was acquired
by Davy Real Estate for a reported €74m (NIY 11.0%). Davy
Real Estate also acquired Marshes Shopping Centre in
Dundalk for €29m (NIY 10.7%). Meridian Point Shopping
Centre in Greystones was sold to a private Irish investor for
€7.225m (NIY 7.43%).
It is encouraging that high street assets have regained
some momentum with three sales completed in Q3. These
comprise 83 Grafton Street (€6.1m / NIY 5.14%), 45 Henry
Street (€3.7m / NIY 6.14%) and Unit 4, GPO Buildings on
Henry Street (€1.33m). Two other properties on Grafton
Street came to the market in Q3; 72 Grafton Street with a
guide price of €10.5m and 69 Grafton Street with a guide
price of €6m. .
ABOVE: 19 Wicklow Street,
Dublin 2
ABOVE: 22 Wicklow Street,
Dublin 2
Lisney Commercial Real Estate 5
67%
6%
1%
26%
Dublin Louth
Waterford Rest of Ireland
Turnover by Location (Q3 2023)
Source: Lisney
40%
33%
19%
7%
1%
Office Retail Industrial
Healthcare Mixed-use
Turnover by Sector (Q3 0223)
Source: Lisney
Top 10 Investment Transactions Q3 2023
OPPORTUNITY LOCATION SECTOR REPORTED PRICE
George's Quay House, Dublin 2 Dublin Oce €81,000,000
Hexagon Portfolio – Donaghmede, Letterkenny, Galway,
Laois, Parkway and Longwalk Shopping Centres
Various – Dublin,
Donegal, Galway, Laois,
Limerick, Dundalk
Retail €74,000,000
Unit D1, Airport Business Park, Swords, Co Dublin and Unit
1A & 1B Rosemount Business Park, Dublin 15
Dublin Industrial €40,750,000
Building F1, The Campus, Cherrywood, Dublin 18 Dublin Oce €33,400,000
1 Westeld, Ballincollig, Co. Cork Cork Other €31,350,000
73-83 Lower Mount Street, Dublin 2 Dublin Oce €31,000,000
Marshes Shopping Centre, Dundalk, Co Louth Louth Retail €29,000,000
J5 Plaza, Finglas, Dublin 11 Dublin Oce €18,100,000
35 Rosemount Business Park, Dublin 15 Dublin Industrial €14,175,000
4 Earlsfort Terrace, Dublin 2 Dublin Oce €11,850,000
Source: Lisney
Investment Q3 2023 Report6
ABOVE: 18 Wicklow Street,
Dublin 2
PRICING
The CRE market in Q3 2023 continued to be impacted by
wider global economic, nancial and geopolitical factors,
which have led to price chipping and a decrease in the number
of completed transactions. In turn, yields have softened, the
degree to which depends on the sector.
In the oce market, we estimate that prime CBD yields in
Dublin increased by 25 bps in Q3, moving from 4.75% to 5%.
Prime suburban oce yields also softened by 25 bps to an
estimated 8% as did prime PRS yields moving to 4.75%. Prime
industrial yields as well as prime high street retail along with
shopping centres and retail parks have remained stable.
The most recent MSCI / SCSI Ireland Property Index gures for
Q3 2023 show ‘total return’ fell further, declining 2.6% for ‘all
property’ in the quarter and 9.7% in the previous 12 months.
This was primarily driven by both rental and yields softening in
the oce sector. In terms of the ‘capital value’ index, declines
were also experienced on a quarterly and annual basis. ‘All
property’ fell by 14.1% in the 12 months but notably, this index
series has declined by 21.6% since Q3 2019. The capital value
index for oces have fallen by 16.9% in the year to the end of
Q3 and by 22.5% since Q3 2019.
SUPPLY
At the end of Q3 2023, there was approximately €620m worth
of on-market investment opportunities available, some of
which had deals agreed. However, given the level of activity
occurring o-market, this supply gure is likely higher.
Many would-be purchasers continue to observe the market
to see how the situation for owners in stressed or weaker
positions evolves. If these owners are forced to sell, it could
impact the market and lead to more pronounced falls in values.
Investment strategies are also changing with some investors
now considering alternative opportunities like hotels and
healthcare due to the lack of supply and adequate returns
in core markets. Consequently, in the months ahead, some
vendors might test the market with scaled-back marketing
campaigns, while others may hold on until early next year to
see how interest rates and pricing settles.
Prime Net Equivalent Yields
RETAIL OFFICE INDUSTRIAL PRS*
Q3 2023 5.25% 5.00% 5.25% 4.75%
Quarterly Change 0 bps +25 bps +0 bps +25 bps
Annual Change +50 bps +85 bps +100 bps +75 bps
* PRS yields assume OPEX at 20% of income
Source: Lisney
Lisney Commercial Real Estate 7
RIGHT: Ground Floor Retail Unit,
Ice Rink, Dolphins Barn, Dublin 8
2%
3%
4%
5%
6%
7%
8%
9%
10%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Q3 2023
Yield
Retail Office Industrial PRS*
Prime Net Equivalent Yields (2011 – Q3 2023)
* PRS yields assume OPEX at 20% of income
Source: Lisney
MSCI Capital Value Growth Index (Q4 2011 – Q3 2023)
Source: Lisney
Investment Q3 2023 Report8
Despite the economic factors
impacting the market, there
is investor demand although
awaiting more price certainty.
Borrowing costs are now at their highest level in 22 years in the
EU. The main renancing rate stands at 4.5%, up 400bps since
July 2022 via ten consecutive increases.
We expect yields to soften further in the coming months as
further price discovery materialises across the full spectrum of
the market.
EU directives are tightening to achieve a climate-neutral
building stock by 2050. As a result, ESG factors and legal
regulations are becoming increasingly important within the real
estate market, impacting the entire property's life cycle from
conception and planning to construction, use, nancing, and
sale. Failure to meet sustainability criteria risks devaluation of
assets. Compliance with the Sustainable Finance Disclosures
Regulation (SFDR) and EU Taxonomy is now essential for
nancing property assets and is inuencing market demand.
Therefore, the real estate industry must adapt to evolving
conditions and take a holistic approach to address ESG
aspects.
Market pricing for shopping centres could be further tested in
the months ahead with the sale of Blanchardstown Shopping
Centre and Retail Parks and The Square Town Centre in
Tallaght.
Despite the economic factors impacting the market, there
is a perk up investor demand although awaiting more price
certainty.
Outlook
Lisney Commercial Real Estate 9
Meet The Team
Jackie Fitzpatrick
Director
James Nugent
Senior Director
Christopher Belton
Director
Lynda Gordon
Divisional Director
Thomas Byrne
Divisional Director
Alannah Kennedy
Surveyor
Aoife Brennan
Senior Director
Ausra Marcelyte
Senior Research Analyst
THE LISNEY INVESTMENT TEAM
THE LISNEY RESEARCH TEAM
OUR OFFICES
DUBLIN
St. Stephen’s Green House,
Earlsfort Terrace, Dublin 2,
D02 PH42
t: +353 (0) 1 638 2700
e: dublin@lisney.com
CORK
1 South Mall,
Cork,
T12 CCN3
t: +353 (0) 21 427 5079
e: cork@lisney.com
BELFAST
Montgomery House,
29-33 Montgomery Street,
Belfast, BT1 4NX
t: +44 2890 501501
e: belfast@lisney.com
Lisney
Commercial Real Estate
PSRA: 001848