Many moving parts in the Irish Commercial Property market as we enter Quarter 2 and look forward to an interesting and somewhat testing 2023 given some recent market reports. We will leave the more detailed analysis of the various sub sectors to the Market Research departments and use this summary to mention some emerging trends on the ground.
- Interest rate increases, Inflation and Geo-political concerns continue to impact market with sector specific pricing adjustments. While some sectors are more advanced in terms of adjusting, others are expected to evolve more slowly. Tighter credit from the Banks combined with a number of gated Commercial Property funds will continue to impact all sectors and yield movements.
- Reduced transactional volumes in most sectors expected to continue as lack of supply of suitably priced product in sectors such as Logistics/Warehousing, Development land and Investment sectors. The number of transactions over €1 million during Q1 2023 was c 27 compared to the Q1 10 year average of c 50 transactions.
- Q1 Office lettings subdued and were down to c 27,000 sq. m. impacted by the Tech slowdown and increase in Hybrid working. ESG requirements and obligations creating tiered demand trends and increased focus on retrofit and refurbishment of older buildings. However increasing level of grey space and office vacancy levels at c 12.5% plus to impact construction and refurbishment timelines.
- Increase in Off-market transactions as volatility brings opportunities for value seeking Private and International Investors who have dominated Irish market over the past year.
- Increase in Retail demand on our premier trading thoroughfares with adjusted more sustainable rents attracting a number of new international retailers. Strong interest also quite evident in Retail parks, where both Local and International Retailers are seeking opportunities. A more recent vote of confidence in the Irish market was Decathlon’s announcement of it’s Finglas store as its number 1 performing outlet in Europe.
On an International level, the European Central Bank has warned of “growing vulnerabilities” in the property markets. The Bank also refers to possible medium term risks of price corrections continuing to grow in the Residential Real Estate sector, in its recent supervisory report.
Despite market volatility, there seems to be a general consensus that the Irish Economy is better placed than most, with strong demographics, low unemployment and resilient exchequer returns to face the market challenges ahead. Time will tell.
