Value-Add Opportunities & International Investors: A Review of 2020 Irish Commercial Sales
We have seen a remarkable increase in both the volume and average value of commercial assets being traded on the BidX1 digital platform in 2020, indicative of a growing confidence in online real estate transactions. Volumes have increased by almost 200% year-on-year, while the average value has increased by almost 30%.
The pandemic has accelerated the trend towards a tech-focused approach to property sales and permanently altered perceptions about the best route to market for such assets. In total, more than 900 Irish properties were sold through the digital platform this year, and over €200m raised, with commercial sales making up 40% of this value.
In terms of asset type, mixed-use properties accounted for more than a quarter of our commercial sales, evidence of a growing focus on value-add opportunities. With yields softening, investors are seeking returns through purchases which offer asset management or development opportunities. Such an assessment tallies with figures for development land sales through the platform – sites with development potential made up 16% of commercial sales.
Interestingly, retail accounted for 24% of total sales, which illustrates that if a property is priced correctly, there are still active buyers. In September, we priced a prominent retail landmark at Number 1 Shop Street in Galway City Centre, which is let entirely to Three Ireland, at an attractive yield of 8.3% (NIY). Four parties registered for bidding – two domestic and two international – driving the final sale price up to €2,006,000, equating to a NIY of 7.25%.
This year has also seen a 50% increase in the number of international investors registering to bid on Irish properties. In the current low interest rate environment, such investors are seeking to diversify their portfolios across multiple markets as the search for yield intensifies. In other words, if you are selling in the current market, reaching a global investor audience is likely to maximise your return.
Our platform provides a liquidity or ‘demand measure’ – calculated by totalling the highest offer from each unsuccessful bidder. It’s a hugely significant figure for us as agents because it provides a concrete indicator of unspent capital, and therefore demand. Between June and October, for example, the total liquidity available was more than €192m. In that period alone, 1,500 underbidders were left empty-handed – pre-qualified buyers who had committed a deposit prior to bidding, all of whom are actively seeking to invest capital in Irish real estate.
Liquidity – unspent capital – on commercial real estate specifically was above €90m in 2020. Demand remains robust.
This piece originally appeared in the Irish Times here.