It’s no surprise that Dublin had an exceptionally strong year in the commercial property market, with the latest report from BNP Paribas Real Estate confirming the trend.

Investment in direct real estate is still outperforming both equities and bonds, the Dublin Office Investment Market Analysis 2019 says. While investment turnover in all sectors reached €3.6 billion, offices accounted for more than 40% of this. 

“This is the fifth consecutive year where total turnover exceeded the 10-year average, with the €3.6 billion total investments representing an increase of 43% relative to 2017.”

Returns in the Dublin office market rose from 6.2% in 2017 to 9.2% last year, on a standing investment basis. Managing director Kenneth Rouse commented: “Returns like this will see the Dublin office market attracting another wave of new investors, most likely from the Far East and Middle East, as well as a continuation of European Investors looking for euro-denominated assets.”

Take-up surpassed 370,000 sq m in 2018, up 5.1% on the previous year. Among the largest lettings were Facebook’s 75,000 sq m take-up of the AIB Bankcentre Campus; Google’s 20,000 sq m lease at Bolands Mills; and Hubspot, who committed to 10,000 sq m at One Sir John Rogerson's Quay.

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Rents rose by 1.8% compared with 3.2%, a slowdown powered by increased supply, but some areas such as Blackrock and Dun Laoghaire recorded higher returns.

Showing a total return of 12.5%, the north suburbs remained the top performing Dublin office sub-market for the third consecutive year in 2018, with returns driven by stronger relative performance both in terms of income returns and capital value growth, says the report.

The south and west suburbs sub-market provided investors with a total return of 11.9% for 2018. Much of this market is dominated by modern office parks, offering large floor areas, located primarily in Sandyford, Leopardstown, Cherrywood, Citywest and Carrickmines. 

The BNP Paribas Real Estate report notes that developers and investors are recognising the appeal of Ballsbridge in Dublin 4 too, which looks set to be home to the expansion of the Silicon Docks in the coming years.

The regeneration of Dublin 1 and improved transport links via the Luas Cross City line have enhanced the city centre location for office occupiers, according to BNP. More competitive rents and significant new mixed-use schemes, both planned and under construction, including the Clerys’ redevelopment, are making Dublin 1 an increasingly attractive location for major corporate occupiers.

In the capital, more than €1.5 billion was spent on 79 deals and there was a strong surge in mega-deals exceeding €100m. Eleven such deals were completed in 2018, accounting for 41% of total commercial market turnover.  Five transactions involved properties in Dublin, the largest being the sale of Heuston South Quarter, Dublin 8, which was brokered by BNP Paribas Real Estate.

Photo: Kenneth Rouse and Kate Ryan, head of research at BNP Paribas Real Estate Ireland. (Pix: Leon Farrell/Photocall Ireland)