Investment Market Review 2021

2021, Year in review: Investment market showing strong recovery after Covid restrictions

Residential investment was the main driver of activity in 2021, while changes in consumer behaviour due to the pandemic sparked investor interest in logistics 12th December, 2021.

Activity in the investment market was strong during the first half of the year despite the fact that investors were unable to inspect opportunities due to a new wave of Covid-19 cases and fresh restrictions.

The gradual easing of these restrictions in the second half of the year resulted in activity trending even stronger and investment volumes are on course to hit between €4.5 billion and €5 billion, potentially making 2021 the second strongest year on record.

Given the economic recovery, continued population growth and a persistent shortage of housing, it is no surprise that residential investment was the main driver of activity in 2021.

While the first quarter was strong, many transactions were carried over from the previous year and new opportunities were limited due to the uncertainty caused by Covid-19.

This changed in the second half of the year as many restrictions were gradually rolled back, however, the time needed to sign and close deals has elongated in part due to more detailed due diligence processes.

Notable deals in 2021 included Union’s purchase of Royal Canal Park for €200 million, Greystar’s purchase of Griffith Wood for €177 million, while Blackrock bought East Village for €127 million.

Investor demand for core income, coupled with a lack of stabilised modern stock, tightened yields to 3.6 per cent and these could trend lower in 2022. Forward commit deal structures were dominant due to a lack of core and core-plus stock on the market, however, there is potential to see more forward funding deals occur in 2022.

We also expect to see a strong appetite for purpose-built student accommodation return, be it for single assets, portfolio deals and corporate deals. The potential impact of the judicial review system on stock will be keenly watched in 2022 as many applications for large residential developments may now be delayed.


Logistics is experiencing abundant investor appetite and 2021 was a record year for the sector. Changing consumer behaviour and technology is driving greater e-commerce adoption and supply chain reconfiguration.

As a response to geopolitical tensions and Covid-19, retailers are engaging in near-shoring and on-shoring in order to minimise supply chain disruption. Strong occupier demand on the back of these trends in conjunction with record low vacancy rates and a shortage of speculative development have acted as a tailwind for rental growth and investor activity.

JP Morgan’s purchase of Units A & B Mountpark, Baldonnell for €60.5 million and Savills IM’s acquisition of the Park Portfolio for €47.9 million were some of the most notable transactions of 2021.

Significant competition for prime opportunities resulted in downward pressure on yields. Prime opportunities – modern or new stock providing ten-year plus income (with fixed uplifts or indexation) – now attract a yield towards 4 per cent. Further yield tightening is anticipated in 2022.

Forward funding assets

Given the level of competition, many investors are forward funding assets such as the Uniphar Building in the Greenogue Logistics Park which is being forward funded by Aberdeen Standard for €70 million. We expect this to continue in 2022.

Investors continue to have confidence in the fundamentals of the office market which are underpinned by continued strong job creation in high value-adding sectors such as technology, professional services and finance. Notable deals included Blackstone’s acquisition of a portion of Facebook’s new European headquarters for €400 million as well as Project Tolka for €290 million. Elsewhere, Deka Immobilien purchased Riverside IV for €164 million.

A significant amount of liquidity is chasing best-in-class properties – those with the strongest covenants, the best specifications and the highest ESG credentials as tenant demand will intensify for these assets as the occupier market recovers. This should result in a tightening of yields below the current benchmark of 4 per cent in 2022. Investors will continue to shy away from secondary offices which may require significant upgrading to satisfy tenant requirements.

Office Occupier Market

The strong fundamentals underpinning Irish commercial and residential property will ensure that investment activity remains strong into 2022.

Supported by abundant capital and liquid debt markets, prime, core assets across the office, industrial and residential sectors will continue to attract multiple bids and competition will lead to some further yield hardening in 2022. Inflation is set to step up a level in 2022, but we do not anticipate any dramatic change to the prevailing low-interest rate environment.

In the office occupier market, employees are continuing to gradually return to the office and companies are resuming their searches for office accommodation. As such, there are now a number of large requirements circulating which we believe will translate into increased levels of takeup in 2022 as momentum continues to build in the market.

Declan O’Reilly is director of office agency and tenant representation at Knight Frank Ireland

This article appeared in the Sunday Business Post on 12 December 2021.  Click the button below to read the article in full.