Real Estate May 2019
This month’s newsletter gives a brief update on some of our projects and also takes a closer look at developments in the Build to Rent sector.
Pádraig Owens is a Real Estate professional and co-founder of Elkstone Partners
ELKSTONE REAL ESTATE MARKET OVERVIEW
Sherry Fitzgerald has begun the marketing process for our 29 unit PRS development in Islandbridge, which launched last week, with a delivery date in July. We also expect to have our showhouse ready in our 17 unit Rolestown development at the end of this month. We had a soft launch last week, with considerable interest to date.
The final steps are being prepared for our SHD planning submission for a 129 development in Whitehall and we expect to be submitting this to An Bord Pleanála in the coming weeks.
We completed the purchase of a well-located, 4 acre residential site in Barna, Co. Galway at the end of March and are in the early stages of preparing our planning application for Galway City Council. We have also agreed terms to buy a 4.5 acre PRS site in north Dublin, which we will be bringing to our clients imminently.
The refurbishment project at our 265 bed student residence building at Copley Street in Cork is near completion, three months ahead of schedule. This will include new amenities with common areas, a gym and other new facilities. The new property will be officially launched in June. Last week UCC announced the purchase of the 1.46 acre “Dairygold” site, located next to this development (read more about this announcement in this link), where the Cork University School of Business will launch in 2023, with an expected 4,000 students.
Our SHD planning application is in the final stages of the decision-making process with An Bord Pleanála, with a decision expected at the end of this month.
Earlier this month, we received a final grant of planning from Dublin City Council for a 71 bed aparthotel scheme on Oliver Bond Street, near Christchurch in Dublin 8.
Build to Rent
Last year, PRS accounted for over 30% of real estate investment volumes and overtook retail as the second largest sector, with just over €1.1bn invested.
Ireland’s population is expected to reach 5 million people within 12 months (Hooke & McDonald) and grew at its fastest rate for ten years in 2018. The estimated vacancy rate in Dublin is now 1.38% . It is expected that the market will remain undersupplied until at least 2023, with projected compounded rental growth of 17.3%. over the next 3 years (Savills). Despite concerns regarding Brexit, interest rate rises and resulting outward yield shifts, Dublin PRS remains a very attractive sector for investors and there is a considerable weight of money pursuing assets in this sector.
While there has been an increase in the supply of units, there is a continuing under supply of well located residential property, particularly in Dublin. In 2018 there were 6,931 new residential units delivered in Dublin of which 1,766 were apartments (Hooke & McDonald). Savills estimates that residential output is still only at 60% of what is required. As a result of these factors, prime yields have tightened to 3.85% (CBRE) over the last 12 months and are now in line with prime yields in other sectors, such as retail and office. While there is less evidence, we expect to see a contraction of yields in suburban markets, particularly for lot sizes above 100 units.
PRS land values have increased substantially over the last number of years, while demand for finished units remains strong with an increasing number of planning grants as well as rapidly increasing construction costs, we can expect this trend to start to flatten. Location (city centre or proximity to transport) will become increasingly important, with poorly located sites potentially struggling as new supply begins to enter the market.
The outlook for the Build to Rent sector remains strong. CBRE estimate that as much as €6.3 billion is currently targeting assets in the sector, with limited supply continuing for the foreseeable future.
Real Estate Article
Our article of interest for this month is CBRE’s bi-monthly market update, which provides a good overview of the current status in each real estate sector in Ireland. Read the full update here.