The first half of 2023 has proven to be a challenging period for the development land market in the Greater Dublin Area (GDA), with a significant decline in both sales and deal sizes.
According to the latest report from Lisney Commercial Real Estate, the combined selling prices for the first six months totaled just €86 million, compared to €279 million in the same period last year. To put this into perspective, only 26 sites were sold in the GDA this year, as opposed to a far more robust performance in both halves of 2022, which saw total sales of €279 million and €244 million respectively.
This decline isn’t just due to a cooling market; several factors are at play here. High inflation and rising interest rates are certainly key contributors, putting pressure on both buyers and sellers. But there’s more to the story. The report also points to regulatory factors, such as discrepancies between national and local planning policies, along with the impact of judicial reviews on approved planning applications. All these elements are encouraging developers to be more cautious than usual, with many opting for “ready-to-go” sites that come with full planning permission and are economically viable.
Geographically, Dublin continues to be the hub of most of this activity, accounting for 77 percent of total turnover. This was followed by County Kildare with 10 percent, County Meath with 8 percent, and County Wicklow trailing at 5 percent. It is worth noting that of the 26 sites sold in H1, 12 already had planning permission. These 12 accounted for 54 percent of the €86 million total.
Interestingly, deal sizes have also shrunk dramatically. The average transaction size for the first half of 2023 was €3.4 million, a significant decline compared to €7.33 million in the first half of 2022 and €6.58 million in the second half of last year. Only two transactions had values exceeding €10 million. Among the noteworthy deals were a €13 million off-market sale of a five-acre site in South Dublin intended for a 428-unit private rented sector scheme, and the acquisition by South Dublin County Council of Lucan House, the former Italian ambassador’s residence, and adjoining lands known as Coldblow, for a combined total of €14.8 million.
Despite the downturn in activity, more than €170 million worth of land was sale-agreed in the GDA at the end of June 2023, with the majority of it (over 70 percent) being in Dublin. The Lisney report suggests that the overall value of sale-agreed land is likely to be even higher, as about one-third of recent activity has been taking place off-market, which is a trend we are seeing on the ground.
Looking ahead, the market is expected to see more availability, driven largely by financial pressures. As more planning applications make their way through the system, we can expect a greater number of “ready-to-go” sites to be listed for sale, offering some potential opportunities in an otherwise tough market. The first half of 2023 may have been a wake-up call for the development land market in the GDA, but pending deals and changing conditions suggest a complex yet potentially more active close to the year.
Lotus Investment Group