There was just one investment deal in Ireland in the first quarter of the year, says estate agency Jones Lang LaSalle – largely because of the threat by the Government to change rent review provisions of existing property leases, writes JACK FAGAN
THOUGH commercial real estate investment volumes in Europe rose by 32 per cent to €26 billion in the first three months of this year, there has been only one single investment deal in Ireland – of €9.25 million – during the same quarter because of Government interference, according to estate agents Jones Lang LaSalle. (The Layden Group paid €9.25 million for Boole House in Clonskeagh, Dublin 4, last month. )
The absence of any large scale investment deals in Ireland stems in part from the absence of debt financing but more particularly from the threat by the new Government to change the rent review provisions of existing property leases. The investment community, and particularly the pension funds, have warned that the setting aside of current legal contracts could led to a serious fall-off in capital values.
John Moran, managing director of Jones Lang LaSalle Ireland, said the volume of investment activity in Europe was in stark contrast to what was happening in the Irish investment market. The fact that there had been only one investor purchase in Ireland of €10 million was an absolutely clear message from both the overseas and domestic investment community of the negative impact on market activity arising out of the proposals surrounding rent reviews.
“At the beginning of 2011 we identified nearly €4 billion of potential buying power in the Irish market which is capital that is absolutely required to deal with the volumes of distressed assets held by Nama and the banks.
“Most of this money, which is foreign, has voted with its feet and chosen not to deploy itself, citing that Government interference with the market and contracts is an absolute impediment to investment.” Elsewhere in Europe, successful debt and equity issuance has provided liquidity to the market which in turn drove cross-border investment from equity rich investors.
Jones Lang expects the current positive trends to continue and maintains its forecast for 2011 of up to a 30 per cent increase in volumes across the region compared to the €102 billion figure for 2010 as the volume of equity targeting European markets continues to rise. Predominantly driven by a continuing interest in core London assets, the UK continued to dominate the European investment market in Q1, capturing 38 per cent of all investment capital in the region. UK transactions totalled €10 billion in Q1, equating to a 41 per cent increase year on year.
