More than €4.7 billion was spent on Irish commercial property last year despite “the turbulence in the global economy”, according to estate agent Sherry FitzGerald.
However, the company noted there was a marked fall-off in transactions in the final quarter, a period that coincided with an acceleration in interest rate hikes from the European Central Bank.
Nonetheless, the €4.7 billion figure, which does not include the €1.1 billion sale of Hibernia Reit to Brookfield Asset Management as it was a company sale but does include institutional investment in residential, marked 2022 out as “another very strong year” for real estate investment here, it said. While this is below the €5.4 billion seen in 2021, it is ahead of the long-term average of €4 billion.
Sherry FitzGerald said the investor spend was particularly strong during the third quarter of 2022 reaching €1.76 billion, one of the highest levels on record for a three-month period.
This was bolstered by the largest transaction of the year, the €500 million sale of the Salesforce complex on Spencer Place in Dublin’s north docklands to the US private equity business, Blackstone.
A breakdown down of the figures shows residential assets continued to dominate investor demand with capital spent totalling €1.6 billion followed by investment in office assets, which came to €1.1 billion.
Investment in the industrial and logistics sector reached the second highest level on record at €441 million. The emerging healthcare sector saw a further €381 million of investment while the capital spend in the retail sector was €362 million.
The Dublin region continued to attract the largest share of investor capital during 2022, equating to €3.6 billion.
Cork, Kildare and Wicklow each accounted for 3 per cent, Sherry FitzGerald said, noting foreign investors accounted for a 62 per cent of total capital transacted, with European investors comprising the majority of this, while US investors absorbed 22 per cent of total.
According to the report, several factors will impact investment activity in the year ahead.
“Interest rates globally are likely to continue their upward trajectory well into 2023, albeit at a slower pace as inflation rates begin to diminish. However, as interest rates stabilise later in 2023, this will bring more certainty and stability to the commercial property market, encouraging renewed interest among investors who delayed decisions in recent months,” it said.
The Irish residential market remains underpinned by severe shortages, the company said with the volume of rental properties at a historical low, driving rental inflation in the Irish market to 8.2 per cent.
“This is putting upward pressure on prices, despite the increased cost of borrowing,” it said, noting that while the level of completions increased by 45 per cent in 2022 compared to the previous year, this remains well below the 50,000 units per annum required to meet demand.
Commenting on the report, Ross Harris, director of commercial and head of residential investment at Sherry FitzGerald said: “Looking forward to 2023, we anticipate more stability in the market as interest rates stabilise, but shortages of quality space in prime locations across asset classes will continue to be a challenge”.
