Supply will be biggest obstacle for private rented sector in 2021

Dublin cemented its position as a Tier-1 city in 2020 off the back of a record-breaking private rented sector (PRS)/multi-family spend in 2019 of €2.4 billion (inclusive of purpose-built student accommodation). This put Dublin in the top 10 cities in Europe from a PRS investment spend perspective.

2020 started where 2019 left off with a huge appetite from domestic, European and global investors for the Irish growth story.

The first quarter saw decent activity, with the largest trade being Roundhill's student accommodation forward purchase with partner KKR in Dublin 8 for €85 million.

While the onset of the pandemic saw investors sitting on their hands going into the second quarter, it did not see a full retreat from the market. This was evident in the trades which took place between Q2 and Q3 by Deutsche Bank subsidiary DWS, including the €145 million purchase of the Prestige portfolio in north Co Dublin, and the €200 million purchase of 368 units at Cualanor in Dún Laoghaire.

Johnny Ronan’s Ardquade holds investment properties worth at least €230m

---

TikTok steps up plan to grow Dublin-based workforce to 5,000

---

Ardale secures €4.82m from sale of Aldi store in Co Wicklow

---

High time for Government to play its proper part in solving the housing crisis

---

Urbeo also continued to expand its portfolio with the purchase for €75 million of 192 units at Park Developments' Clay Farm in Leopardstown.

The current and final quarter has seen Irish Life acquire 94 units being developed in Dalkey by Francis Rhatigan's Winterbrook for €49 million, and Roundhill Capital and the QuadReal Property Group paying €123.5 million for 297 units the Cosgrave Property Group is developing at Northwood in Santry.

Orange Capital Partners, meanwhile, purchased a portfolio of 151 apartments from Ires Reit for approximately € 48 million with their partners GIC.

There was little activity in the city centre/city fringe areas where investors targeted the mid-priced rental markets which would have been least affected by the Covid-19 factor. We expect to see a shift in this in 2021 once a vaccine is in place and offices start to open up bringing foreign workers back to the city.

]This year will finish with PRS investment spend of around €1 billion, a decrease of up to 60 per cent on 2019. Although this is inconsistent with the mature German and Dutch markets where the investment spend will be broadly in line with 2019, and the UK market where this year’s spend will be up by between 25 per cent and 30 per cent, it can be explained. This is being driven by domestic pension funds flocking to the PRS sector in their territories while Ireland has been curtailed given investors in this sector are predominantly international and require air travel.

The outlook for 2021 is positive, however ,with supply constraints being the biggest boundary to investment activity in this sector. A number of trends that were set in train this year will continue.

These include:

*Forward-funding deals which are driving the European PRS market could play a key role here where the sponsors on the land side are deemed to be institutionally-suitable counterparties.

*Long-income social leases will continue to be attractive for a specific investor type and the potential for a solution around an affordable housing lease structure could help deliver much-needed affordable housing for “key workers”.

*Investor demand for purpose-built student accommodation has been limited but once universities reopen fully and international students resume travelling, this sub-sector will see a renewal of activity.

Tim MacMahon is a director and head of residential capital markets at Knight Frank