Sherry Fitzgerald is making a case for increased Private Rent Sector apartments as commercial property investment in Ireland was in excess of €5bn through 2021.
The final quarter of the year was particularly buoyant and saw close to €2bn of commercial property assets exchanged, according to the estate agent.
Forward commit agreements, which have become a prominent feature of the Irish investment market over the past number of years, accounted for c.25% of the total spend last year.
The Residential sector accounted for 34% of total spend in 2021, with c.€1.7bn of capital deployed, while Office assets accounted for c 30% or €1.5bn. Industrial assets accounted for a further 20%, way up from 2% of total spend in 2016, highlighting the increasing appetite for this asset class.
Investment into Private Rented Sector(PRS) developments and assets amounted to €1.7bn, according to the property consultants. The corresponding figure was €1.2bn in 2020 and €2.5bn in 2019.
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Sherry FitzGerald managing director Marian Finnegan commented: "The fundamentals which underpin the Irish PRS market - the strong economic and demographic outlook as well as the much-publicised mismatch between supply and demand - remain more pertinent than ever. Indeed, the pandemic exacerbated the severe housing shortage the country already faced."
Several large-scale transactions took place last year, the most substantial of which was the Royal Canal Park, Ashtown, also known as 8th Lock. This transaction comprised 435 units in a forward fund deal for in the region of €200m.
Another notable transaction in 2021 was the Dwyer Nolan Portfolio. Here, 401 units transacted in a forward commit purchase by Ardstone Capital for in excess of €180m. The portfolio consisted of units in Santry, Finglas and Clongriffin.
Finnegan added: "Notably, all of the top ten PRS transactions in 2021 were either part or wholly forward commit style transactions, underlining the importance the PRS sector plays in bringing new supply to the market.
"Circa 71% of total PRS spend in 2021 was by way of forward funds/purchases, the largest on record. Due to the shortage of standing stock availability over the last few years, investment into the PRS market has drastically shifted away from standing stock towards forward commit trades.
"In 2020 and 2021, in excess of 4,100 units were funded through forward commit purchases, predominantly as entire schemes. This underscores the importance that PRS plays in fostering new housing development."
Finnegan contends that "contrary to the prevailing media discourse", PRS has a critical role to play in providing new homes.
"The uptick in apartment construction is a direct consequence of PRS investment, and without which much of these new units would not be built. Construction viability remains challenging, particularly in apartment construction, and PRS investment has a critical role to play in funding such developments," Finnegan stated.
In a market update, Sherry FitzGerald references "concerns currently present in the market around reactionary policy intervention", while adding that strong appetite remains from investors for PRS as a product.
The adviser expects "healthy transactional activity" within the PRS sector through 2022.
"Prime initial yields for PRS were in the region of 3.7% in 2021 and the potential exists for some further yield compression in 2022," says the report.
"However, it remains to be seen what impact, if any, potential interest rate movements, inflation, or the current geopolitical situation may have on investor return requirements. That said, the Irish PRS market remains attractive as an investment opportunity."
