THE 12 largest institutions with Irish property investments reduced their holdings by £20 million last year. The funds, which control portfolios valued at £915 million, sold £72 million worth of properties in 1996 but only reinvested £52 million. In the previous year, they spent £27 million more on property than they sold. Although last year's returns showed the first disinvestment by the institutions for 13 years, the outcome was largely influenced by the Bank of Ireland Pension Fund's decision to sell Stillorgan Shopping Centre to the private sector for over £38
While the shortage of prime investment properties and the heightened level of competition from private investors curbed institutional activity last year, there were other fundamental reasons for holding back. After three years of strong capital growth, some of the funds availed of the strong market to "work their portfolios" - by selling off older buildings and re-investing in newer stock. During the property boom of the late 1980s, the same funds watched the capital value of their portfolios grow but did not avail of the same opportunity to upgrade their property investments. By the time they came around to selling some of their older properties, there was little demand for them.
The 12 institutions which dominate the Irish market reported all-property returns of 18.9 per cent last year, according to the Investment Property Databank, which held its annual results presentation in Dublin last week.
One of the speakers, Mr Robbie Kelleher, head of research at Davy Stockbrokers, told the meeting that job creation over the past four years was double what it had been over the previous 30 years. While they expected some slowdown in the pace of economic expansion, they would still see significant growth over the next few years. That should be particularly beneficial to the property market because with low vacancy rates and a limited number of speculative developments under way, commercial rents were likely to grow significantly over the next few years. On top of that, interest rates were likely to fall rather than rise after EMU and this again would promote higher rents and falling yields.
