Knight Frank Research Note on the Development Land Market – Update 12th July 2021
- In excess of €99 million worth of development land transactions occurred in the second quarter bringing the total for the first half of the year to almost €194 million
- The majority of activity in the second quarter took place in Dublin where more than €58 million transacted (59%). Activity was also strong outside of Dublin with just over €30 million (30%), sold in Co. Meath.
- Strong competition from both Irish and International developers as well as owner occupiers to acquire quality industrial land banks has been a key trend in the second quarter as seen by the sale of the Airlinks, Cherryhound Junction and the M3 Gateway Lands for €26 million and €10 million respectively.
- Significant demand for residential end units exists in Dublin and the Commuter Belt which is resulting in strong price inflation. The easing of public health restrictions and the acceleration of the vaccine rollout is providing developers with the confidence to acquire opportunities and replenish their land stock.
- Residential development land opportunities with planning permission in place are extremely sought after and are commanding a premium.
“Activity is being supported by the significant demand for residential end units that exists in Dublin and the Commuter Belt which is resulting in strong price inflation. The gradual easing of public health restrictions and the acceleration of the vaccine rollout is providing developers with the confidence and momentum to acquire opportunities and replenish their land stock. Residential development land opportunities with planning permission in place are extremely sought after and are commanding a premium,” James Meagher, Director at Knight Frank.
In what was one of the larger residential transactions to occur in the second quarter, Knight Frank sold a 14.9-acre site in Jamestown, Rathoath, Co. Meath with planning permission for 228 residential units to Kingscroft for in excess of the guide price of €9 million. Knight Frank also sold two sites in Phibsborough, Dublin 7 – The Former Des Kelly Furniture Showroom and the adjoining site at 168/169 Phibsborough Road for over €6 million. The amalgamation of both sites will allow the purchaser to construct a significant PRS or student accommodation led scheme given its proximity to the new TU Dublin campus at Grangegorman and the LUAS. Elsewhere, an 11.1-acre site on the Glenamuck Road in Kilternan, Co. Dublin with planning permission for 197 residential units was also purchased for above €10 million – ahead of the guide price of almost €9 million.
However, despite the strength of activity in the residential development market in the second quarter, the market faces some uncertainty over the coming months due to a number of upcoming government initiatives which were recently announced. These include the earlier than expected replacement of the Strategic Housing Development Act which is being brought forward from February 2022 to potentially October of this year as well as the proposal to double the percentage of Part V social and affordable homes in any future development to 20%.
“While the impact on land values remains to be seen, the lack of clarity has the potential to create delays and cost issues which could potentially disrupt the supply of housing at a time when it is most needed,” said Meagher.
Activity was also strong in the commercial development land market, particularly in the industrial sector as evidenced by the sale of the 64.5-acre industrial landbank at the Airlinks, Cherryhound Junction, Co. Dublin which was purchased by IPUT for €26 million. Elsewhere, the 22.2-acre M3 Gateway Lands in Clonee, Co. Meath which have the potential to accommodate a large logistics hub or data centre were sold for €10 million.
“There is strong competition from both Irish and international developers as well as owner occupiers alike to acquire quality industrial land banks as a result of the growth of e-commerce”, Robert O’ Connor, Senior Research Analyst at Knight Frank. In terms of the office sector, it was encouraging to see that the 0.6-acre City Arts Centre site at 1-6 City Quay – which has the potential to deliver a 145,000 sq ft office building – is now sale agreed amidst strong developer interest, reinforcing the importance of the office in the context of plans about the future of working.