Sun to set on second golden period for Irish commercial property
Green REIT reported a total return of 24.4% in the year and profit was at €157m (30 June 2014: profit of €43m) with basic earnings per share (EPS) rising 89.5% to 23.5 cent.
Green REIT had an initial public offering (IPO) in 2013 and its sole investment manager Green Property REIT Ventures Ltd., is led by Stephen Vernon and Pat Gunne. Vernon was managing director of Green Property Plc from 1993 until he took the company private in 2002, and he has since been chairman of the closely held company.
A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing property assets.
Pat Gunne, chief executive of Green Property REIT Ventures, said Monday that Dublin’s office market is facing “possible oversupply” from 2018 onwards. He said that 5m square feet of new space is under development. “One million is pre-let and we would expect the other 4m to be funded over the next 12 months,” Gunne added.
Stephen Vernon, executive chairman, said that the “golden period” of returns for Irish commercial property is probably over, and that Green Reit is unlikely to see another year of 24% growth.
According to MSCI, the global index firm, total returns from Irish investment property hit 6.3% in the quarter to June 2015, rising above the 4.3% returned in the first quarter of 2015. Offices continued to lead the market in Q2 2015, returning 7.4% in the last quarter, and 37.7% year on year compared with 33.0% in 2014, representing another record performance figure for the office sector
Irish returns were among the best in the world in 2014 — returns on investment hit 40.1% year on year in Q4 of 2014, rising above the previous quarter’s high of 33.2%.
The 12-month return for Irish commercial property of 33.7% to the end of June 2015 was more than double that for the UK over the same period (16.7% according to the IPD UK Monthly Property Index). Irish real estate also outperformed Irish bonds, which returned 7.6% over the last 12 months (JP-Morgan 7-10 yr) and Irish equities, which returned 36.6% (ISEQ Equity Index).
Colm Lauder of MSCI, said: “The IPD/SCSI Ireland Quarterly Property Index shows that it has once again been a very strong quarter for Irish office investments. That said, we have also seen an improvement in the industrial sector, with total returns rising 250 basis points over the course of the second quarter of 2015.
“The prime retail sector recorded a significant pickup in rental performance during the second quarter, with market rents climbing by 4.4% on Grafton Street as confidence returns to the retail trade. Values on Ireland’s leading high street have grown by 49% in the last 24 months, although this still leaves values 62% off the 2007 peak. Investment pricing on Grafton Street showed an equivalent yield of 4.5% at the end of June, a long way off the 2.6% level achieved during the boom years.”
Pic above: MSCI's IPD/SCSI Ireland Quarterly Property Index to June 2015.