Irish commercial property investment jumps 40% in first nine months of year

‘Exceptional’ one-off sales drives market, with office and residential sectors attracting bulk of investor interest

Investment in Irish commercial property jumped 40 per cent in the first nine months of the year compared with 2021, even as the amount of office space under construction in Dublin fell between July and September.

The latest quarterly investment report from broker CBRE indicates that investors pumped a total of €1.8 billion into the market between July and September, “significantly above the quarterly average” of roughly €1.2 billion. That pushed total investment so far this year to €4.9 billion.

CBRE said a number of large deals drove the market, including the €1.1 billion sale of Hibernia Reit’s portfolio, completed in the second quarter.

Between July and September, the biggest transaction was private equity giant Blackstone’s €500 million purchase of Salesforce’s new European headquarters and the Samuel Hotel in Dublin’s Spencer Dock from Johnny Ronan’s Ronan Group Real Estate.

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“While volumes in the Irish market have been robust in the year to date, exceptional one-off sales have driven spend materially higher than in 2021,” said Colin Richardson, head of research at CBRE Ireland.

“The office and residential sectors continue to attract the bulk of investor interest. However, the dynamics of the Irish investment market continue to shift, in line with global macroeconomic headwinds, which are negatively impacting sentiment. With interest rate increases and rising debt costs, we are beginning to see yields come under pressure. This is likely to be reflected in the final quarter of the year”.

In a separate report on Wednesday, property adviser and investment manager JLL Ireland said that investment volumes were relatively healthy throughout the quarter, albeit “within a cloud of increasing investor hesitancy” due to rising interest rates.

“The increasing cost of debt is beginning to impact underwriting, yields and returns,” the company said and the final quarter of the year is likely to be characterised by “reduced liquidity” and reduced bidding intensity, it added.

John Moran, chief executive and head of capital markets at JLL Ireland, said that while third-quarter volumes were encouraging, particularly in the office, residential and alternative sectors, there is “a high degree of uncertainty” within the market heading into the final three months of the year due to “rising bond yields and interest rates”.

Meanwhile, analysis by Cushman & Wakefield shows that 409,500sq m (4,407,821sq ft) of office space was under construction between July and September, the lowest level since 2021. Some 90 per cent of this space is in Dublin’s core business district, the company said, and 37 per cent is pre-let or reserved.

Aisling Tannam, director of offices at Cushman & Wakefield, said “a growing theme” in the Dublin market is rising demand for new offices with better locations in the city centre and more sustainable profiles.

“This shift,” Ms Tannam said, is likely to increase vacancy rates in the capital “at the aggregate level”, as “older, poorer quality stock becomes less attractive”.

Ian Curran

Ian Curran is a Business reporter with The Irish Times