Quarter 4 Activity
- Completion of an impressive refurbishment of Trident House, Blackrock. Terms are agreed to let the entire building to a single occupier;
- Strategic acquisition of Carlow Retail Park, further increasing our presence in the retail park sub sector;
- Progression of redevelopment projects, on budget and on schedule.
- 49 % Retail
- 10% Industrial
- 30% Office
- 5% Redevelopment
- 1% Other
- 5% Cash*
* Includes cash, assets and liabilities.
Quarter 4 Financial Highlights
- Strong performance of 5.9% for 2018; best performing unit-linked Irish Property Fund in 2018;
- Rent collection rate of 96% for 2018;
- Attractive income yield of over 5%.
Lease Expiry Profile - % Net Rent
Based on scenario with all breaks exercised; excludes tenants on a rent free period.
Irish Commercial Property Fund Statistics
Overall fund size (includes cash): €592.4m
Property portfolio size: €524.2m
Annual rental income: €29.3m
Initial income yield: 5.09%
Vacancy rate: 3.42%
WALT: 6 years and 10 months
2018 has been another very strong year for the Irish commercial property market with investment volumes of €3.6bn for the year, well ahead of €2.2bn reported in 2017 (JLL). Take up in the office sector surpassed all previous records and overseas buyers continue to boost volumes. Industrial assets are increasingly in demand with rents rising by 6.5% in 2018, now at €9.85 per square foot. The retail environment continues to evolve, although not to the same extent as in the UK or parts of Europe. Prime high street rents are now commanding up to €630 per square foot. We have seen the emergence and establishment of non-traditional sectors such as the ‘private rental sector/build to rent’, student accommodation, ‘flexible/Co Working space’ and the hotel sector all capitalising on increasing demand for alternative real estate
While global stock markets and the ISEQ (-20% in 2018) continue to experience a high level of volatility, commercial property markets, which are not correlated to stock markets but are reliant on the wellbeing of the economy, are generating strong single
Prime income yields have remained stable across retail (3.2%) and office (4%) while industrial yields have reduced reflecting the strong demand in this sector (5.2%) (Q4 Lisney). Unemployment is now at 5.3% (CSO December 2018) down from 16% in 2012. The Irish Economy continues to perform well and the Economic and Social Research Institute (ESRI) expects GDP growth of 8.2% for 2018 and 4.2% in its outlook for 2019 – the higher end of European expectations. Brexit remains a concern however it may emerge as a threat or an opportunity over the course of the year. A no deal Brexit could have a significant impact on the Irish Economy. To date it has resulted in an increased demand in the Dublin office and logistic sectors. Interest rate rises in the Eurozone are not expected for at least the next six months supporting a healthy real estate market well into 2019.
Fund performance for 2018 came in at a solid 5.9%, the best performing Irish Property unit linked fund over one and three year period. The exceptionally high capital returns experienced in 2013-2016 have eased off, with market driven capital growth continuing but at a slower, more normalised pace. Property returns are mainly being driven by income, and therefore the high quality of the Fund’s income (yield, WALT, tenant strength etc.) is very important.
At 23 Shelbourne Road, Ballsbridge a new lease was signed in late quarter four, the third new lease in recent months with only a small amount of vacancy remaining in the building. The Fund’s most recent acquisition, Carlow Retail Park, is fully let and we are working on further asset management initiatives to improve the site. The retail park sector of the retail market continues to improve as the volume of new house builds gathers momentum benefiting the Fund’s three retail parks. In Royal Hibernian Way, the upgrade of the shopping mall is almost complete with shop front signage and the mall entrance signage now in place, its new restaurant Press Up group’s ‘Isabelles’ opened just before Christmas. We are in negotiations with parties for the second restaurant unit to provide a complimentary food offering.
With office rents in the city centre double the price of Dublin suburbs we are seeing increased activity in the suburbs which is benefiting rents within the Fund’s large South Dublin office footprint of Sandyford, Leopardstown and Blackrock. In Blackrock, the Enterprise House redevelopment continues at pace. The building is now at fifth (final) floor level. The new basement car park under Enterprise House was handed over to the adjacent Shopping Centre at the end of November, in time for the Christmas period. Trident House refurbishment works also completed late December, and we are letting the entire building to a single occupier. Collen Construction is due to commence works on the shopping centre refurbishment in January which will continue until the end of November 2019. Improvements in a number of market rents also benefited the Fund in Quarter 4.
Kilkenny Retail Park, Kilkenny
Kilkenny Retail Park, is located three kilometres south of Kilkenny City with access from the outer ring road and the N10 Waterford Road which links the M9 Dublin/Waterford motorway. It is home to a number of high profile retailers including Woodies (the anchor tenant), DID, Petmania, Home Focus and KFC and is a busy and thriving retail park. In order to add further value to the park and improve its income yield, during 2018 we constructed a coffee pod now let to ‘Costa Coffee’. Costa opened in early December to benefit from Christmas trade. A similar strategy in our Globe Retail Park in Naas resulted in a 10% increase in footfall and increasing dwell times in the park. The addition of the coffee pod has resulted in a move by the retail park from a redevelopment asset to a core, income-producing asset with an impressive initial yield of over 8% and WALT of over eight and a half years.
Royal Hibernian Way, Dublin 2
Royal Hibernian Way is situated in a prime location in Dublin City Centre linking Grafton Street to Dawson Street. The LUAS cross city line now stops outside the entrance. The development comprises of 71,500 square feet of office and 19,500 square feet of retail space. A change of planning was achieved to amalgamate smaller retail units and incorporate restaurant uses into the mall. This was a significant accomplishment given planning restrictions in the area. During 2018, the mall area underwent a complete refurbishment which included a major upgrade of external pedestrian areas and signage. Existing retail units were amalgamated to achieve larger, high quality units for restaurant use and there was an expansion of the retail area to create additional floor space (incorporating the underutilised Lord Mayors Walk) which more than doubled its estimated rental value. High calibre tenants include Davy Research, Marco Pierre Whites, Lemon and Duke and Press Up Group – their latest restaurant offering Isabelle’s opened its doors in December 2018. As the retail works are nearing completion, planning permission to redevelop ‘Block C’ (for office use) was submitted to Dublin City Council in December with a decision expected later this year. The planning submission proposes to reconfigure its interior to include a generous lobby and a higher profile entrance off Duke Lane. Additional floor space may be generated by way of an extra floor and bridges.
In some tables and charts, due to rounding, the sum of the individual components may not exactly equal the stated totals.