Turnover in the Irish Investment Property Market in 2010 is expected to be significantly higher than in 2009. Investor sentiment is showing signs of improving but the supply of prime assets is at its lowest since 2005. Prime yields are showing signs of stabilising. These were some of the main findings of the 'Investment Market in Minutes Q1 2010' from Savills.
The figure for Q1 2010 was expected to be higher but a number of transactions are still under negotiation. "Despite the apparent lack of transactions we expect that turnover by the end of Q2 could exceed 500 million made up of approximately 25 individual transactions. This would compare favourably with the levels achieved in the first six months of 2008 (441 million and 25 transactions) and would be significantly better than the same period in 2009 (85 million and 12 transactions)" adds Ms. Henry.
Due to the high returns currently on offer there continues to be significant interest from international investors interested in investing in Ireland. "These parties are typically looking for prime, well-configured assets with secure tenancies and have the ability to transact in relatively large lot sizes. Unfortunately very few transactions have actually taken place reflecting the limited supply of suitable product available" says Michael Clarke, Associate, Savills. "Investor sentiment has improved noticeably but activity has been largely confined to secure product with long leases, primarily bank sale and leasebacks, which dominated market turnover figures over the last year with approx. 30 transactions taking place at yields ranging from 6.00-7.25%" he added.
Supply will continue to remain scarce in the short term. The main property funds are expected to continue to hold the majority of their core assets and the expectation is that NAMA will not offload many significant higher quality assets in the short term. The net result will be that it is going to remain difficult for investors to source quality investment properties producing secure income.
"We estimate that the current supply of investment stock on the market which is not currently under offer is in the order of 250 million, which is the lowest level of supply since 2005. Furthermore much of this has been on the market for over 18 months and virtually all of this stock is made up of non prime assets for which there is currently little demand. Virtually no new properties have been publicly marketed over the last six months and the majority of deals that are taking place are arising from off market discussions" added Mr. Clarke.
Prime yields are showing signs of stabilising although declining rental levels will continue to impact on capital values. Yields in all sectors are currently running at significant discounts to long term averages. Prime Dublin Retail yields are estimated at between 6.0-6.25% compared to a 15 year average of just over 4% while prime office yields are estimated at between 7-7.25% compared to a 15 year average of just over 6%. Prime industrial yields are estimated at between