Pension Irish Property Fund - Quarter 2 2019

Over the second quarter, residential investments boomed. According to Knight Frank, approximately €1.8bn in investment transactions has taken place in Ireland so far over the course of 2019. Of this, €1.2bn was traded in the second quarter, a period where residential investments dominated, accounting for 45% of turnover.

By the end of the second quarter of 2019, the main investments completed in the market were the Charlemont Exchange for €145m and The One Building, Grand Canal Street, for €49.5m. While ongoing transactions of sale include the Reflector, South Docks at a guide of €155m; The Sorting Office, Cardiff Lane at a guide of €240m; Bishops Square, Kevin Street at a guide of €180m; and Five Hanover Quay at a guide of €190m. We believe that these sales are likely to be completed sometime during the third quarter.

So far, the acquisition of another 25% in Pavilions Shopping Centre for €71m, and the sale of the Sports Direct flagship premises on North Earl Street for €20.8m represent our largest retail investment transactions in 2019. Whereas, we have only had one industrial investment sale this year, the Mygan Industrial Estate in Finglas for >€10m.

The residential investment sector is very active. Where we are engaged in negotiating various forward purchase or forward funding deals. 

Over the second quarter, we saw a particularly strong performance in the office investment market. A key driver behind this performance was the inflow of capital from South Korean funds. These large inflows from South Korean funds are due to the raising of their historically low real estate allocations; taking advantage of the 2015 regulatory change and cheap financing; as well as the hedging of the costs of investments in the US, where achieving required returns is increasingly difficult as the exchange rate continues to move.

Apart from the softening of yields of secondary and regional retail assets, a product of the effects of structural changes on the retail economy, rental or capital values exhibited no material movement.

Demand for office space in Ireland also continues to grow – the principal consumers of this new office space are largely technology companies engaged in expanding their organisations. Meanwhile, the serviced office market also continues to expand throughout the city.

The industrial market remains stable; however, values are at a discount due to the previous cyclical high.

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