The office complex Grand Canal Square 4 and 5, designed by Daniel Libeskind, was completed in 2009 and received a BREEAM “Excellent” sustainability rating.
mauritius images / Alamy

Celtic Comeback

The financial crisis hit Ireland hard and sent its property markets plummeting. Now, though, the Emerald Isle is recovering – and learning lessons from past mistakes.

Five years ago it would have been unthinkable for most investors to even consider investing in Ireland, as the country was plagued by half-built “ghost estates” and plummeting property prices. The Celtic country was still reeling from the aftermath of one of the worst property crashes in its history, which had been fuelled by reckless lending by Irish banks. However, the county is bouncing back with a vigour that few could have predicted. In 2014 the island state topped the growth statistics for the whole of the EU with its Gross Domestic Product (GDP) rising by 5 percent and it is forecast to have the highest growth again for this year and next. A continued rise in employment has helped reduce the unemployment rate to just below 10 percent in April, and the country’s Minister for Jobs, Richard Bruton, believes the rate could be even lower at 6 percent by 2018.Ireland’s stellar performance is in sharp contrast to other European states that were also forced to seek bailouts from the European Central Bank during the crisis. Portugal has an unemployment rate of 13.5 percent; Spain’s is 23 percent while in Greece more than one in four of its workforce is out of a job. The Celtic economy has also continued to benefit from strong trading ties with the US and the UK and the weakening of the euro, which has boosted exports. The weaker euro is also making Irish real estate increasingly attractive to overseas investors. 


Fergal O’Brien, Chief Economist at Ibec, which represents Irish business, said Ireland’s economy was “firmly in recovery” and said: “Given the scale of Ireland’s recent recession and the underlying strength of its business model, Ibec expects that potential volume growth in the economy over the coming years could well be in excess of 4 percent annually as the economy recovers to its potential level of activity.” This economic growth is clearly having a beneficial impact on Ireland’s once-devastated property market. Investment activity across all sectors – particularly office and retail – is on the rise and with a total return of more than 40 percent in 2014, the Irish commercial real estate market is one of the best-performing markets in Europe. CBRE, a global property consultancy, said that €4.58 billion was invested in Ireland’s real estate sector last year, and more than half of that was from overseas buyers.


Office lettings reach 2007 level

Germany’s Union Investment Real Estate GmbH made its debut in the Irish market this year buying an office complex – 4 and 5 Grand Canal Square – in Dublin’s Docklands for about €230 million. This ensemble, consisting of two buildings with a total area of about 23,300 square metres, is fully let, with an average remaining term of more than ten years. Just a few months later, Union Investment’s real estate asset managers secured the Burlington House development project. The British company Development Securities will erect an office property on a 6,500-square-metre site. The identity of the future tenants has not yet been established. Completion is planned for the second quarter of 2017.Philip La Pierre, Head of Investment Management Europe at Union Investment Real Estate GmbH, said: “Ireland’s sustained economic recovery is evident in the steady growth in rents, which looks set to continue over the next few years.” Data from Murphy Mulhall shows that during the last twelve months office take-up in Dublin has reached its highest level since 2007 at around 213,700 square meters. This is 31 percent above the five-year average. The Dublin property consultancy said that rents in Dublin had also increased by a bumper 33 percent year-on-year in 2014, outpacing the rate of growth in markets such as the West End of London.


Murphy Mulhall said the take-up by nationality showed that after domestic tenants, the next most active occupiers were from the US, which accounted for 31 percent of all take-up. Many tenants, particularly international tenants such as Facebook and Google are attracted by Ireland’s 12.5 percent corporation tax as well as its young, highly educated workforce. James Mulhall, co-founder of Murphy Mulhall, said office rents were growing strongly because “at last, the cranes were back” on Dublin’s skyline. The development of new projects came to a crashing halt after the recession, with banks declining to provide financing. There is now a serious shortage of “Grade A” office space in Dublin and prime office rents are expected to grow in double digit percentage points in the coming years.


The Burlington House development project in Dublin joins the portfolio of the UniImmo: Deutschland open-ended real estate fund.
Union Investment
The Bishop’s Square office building in Dublin was acquired by the US property group Hines for €92 million. This makes the deal one of the five biggest in the first quarter of 2015.
mauritius images / Alamy

Positive economic climate boosts retail market

“Any office market is a subset of the economy in which it exists. As the economy does well, companies expand, which leads to an increase in take-up,” said James Mulhall. “We didn’t have any growth five years ago but we have it now and that can only be a good thing for the Dublin office market provided we can deliver a measured supply of space to satisfy the occupier demand that emerges from this new era of growth.” Ireland’s retail sector is also starting to see a marked upturn in performance. More than €1 billion was injected into Irish shops and malls last year and prime retail yields have contracted by 50 basis points since the third quarter of last year to stand at 4 percent today. High street retail vacancy rates have begun to improve across many cities in Ireland as shoppers, gaining renewed confidence in a rising economy, start spending again. 


Ireland’s sustained economic recovery is evident in the steady growth in rents, which looks set to continue over the next few years
Philip La Pierre, Head of Investment Management Europe at Union Investment Real Estate GmbH

CBRE reported in April that high street vacancy rates had improved markedly in six out of nine main retail locations across the country during the past six months. In Dublin’s top shopping area, Grafton Street, Zone A retail rents have increased to €5,500 per square metre per year. Many market experts believe that one of the keys to Ireland’s recovery and the reason why it is attracting so much overseas interest is that investors are able to buy assets on a larger scale than in other markets. This is attracting buyers who may not have considered investing in Ireland before on the basis that the market was too “small”.


Growth mainly in major cities

When Ireland’s property market collapsed the country set up the National Asset Management Agency (NAMA) to help consolidate the debt amounting to billions held by the now nationalised Anglo Irish Bank. NAMA has sold off a number of large portfolios, which contrasts with other distressed markets where assets have not come to the market quickly. Research shows that a large proportion of the more than €20 billion invested in Irish loan portfolios has also come from non-domestic buyers wishing to capitalise on Ireland’s expected upturn. Enda Kenny, Taoiseach (prime minister) of Ireland, has said he wants the country to have a broad-based economic recovery rather than to fall back into the construction-fuelled boom that led to Ireland’s undoing seven years ago. He said in March: “We’re not going back to the days of the Celtic Tiger. That wasn’t a real success story. 


It was a veneer and had a shallowness about it that people have paid the consequence for, but I think there’s an example here of a government and people prepared to engage constructively with the institutions of Europe and beyond.”Ireland’s property market is not out of the woods yet though, as growth is still heavily focused on the main cities, such as Dublin and Cork. In addition, while values are rising they are still almost 40 percent below the last peak in 2007.However, this means the Irish market could have some way to go still with rents and capital values likely to rise, which is why it is attracting such keen interest from investors. Market experts predict that overall prime yields in Ireland could compress by at least another 25 basis points over the next twelve months. Marie Hunt, head of Ireland research at CBRE, said the Irish market had “gone from boom to bust to boom again in spectacular fashion” and said: “There is nowhere in Europe that demonstrates cyclicality quite like the island of Ireland. Having experienced a most dramatic economic crash after the global economic downturn in 2008, and a commercial real estate downturn of a magnitude unparalleled in Europe, the Irish economy and property market have rebounded significantly over the past two years.”


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