The development land market in the greater Dublin area continues to perform well. Activity levels remain good and we estimate that market turnover will be about €1.1 billion this year. While this is less than the combined volume of sales in 2018, which was just over €1.45 billion, it is notable that there were significantly fewer deals done in 2019 compared with the previous year.
While final figures are not yet available, it is likely that only about 60 per cent of the 145 deals completed in 2018 will be done in 2019. This means that the average lot size is increasing, having been about €10.3 million in 2018 but will be over €15.5 million in 2019.
Market demand depends on the nature of the purchaser. Domestic builders are focusing on the smaller infill sites while overseas investors are concentrating on the larger redevelopment opportunities in the city centre. Premiums are being achieved for sites with planning permission that have a low-risk route to delivery and developer exit. Speculative land purchases without planning are still occurring for well-located sites. These demand trends will continue next year.
Stabilisation
One of the most notable trends this year was the stabilisation in development land prices. There are various reasons for this. These include rising construction costs some of which are associated with near-zero energy building regulations, slowing growth in end values of completed schemes, and developers focusing their attention on getting planning permission and completing existing schemes rather than acquiring new opportunities. These factors will continue to have an impact on prices in 2020.
There are proposals to rezone 20 land banks in Dublin City Council’s administrative area, which are currently zoned “Z6 Employment & Enterprise”, to either residential, mixed-use, city centre or open space. This will be a significant feature of the Dublin land market in 2020 and beyond. On the surface, this is an important measure to assist with housing requirements, however, many of the lands are in fractured ownership and may take some time to convert to higher-order uses. Development, particularly in the likes of industrial estates, may begin on lands at the periphery and progressively work in.
Objective
Another feature of the market next year will be the commercial State-sponsored Land Development Agency (LDA). Its primary objective is to ensure the optimal use of State land and deliver housing where appropriate. While it was established in 2018, the agency only commenced operations this year. To date, we understand that it has about nine projects ongoing.
Several high-profile sites will likely sell next year. The sales process is currently under way for an 80 per cent interest in the former Irish Glass Bottle site. This process has moved to the second round and a conclusion is expected in March.
CIE is currently tendering for the appointment of property consultants on 7.2 hectares (18 acres) of land at Heuston Station for a potential 1.6 million sq ft of mixed commercial and residential development, and this could become available next year although with such a large parcel it may be released in phases over time. As such, we expect continued activity in the development land market next year and similar to this year, market turnover is likely to be driven by large deals.
