Investment in commercial real estate plummets to lowest level since 2013

The total volume of investment spend in Ireland’s commercial property market has fallen to its lowest level since the tail end of the global financial crisis. The latest statistics from BNP Paribas Real Estate show that just €161.7 million was spent across the various sectors of the market in the first quarter of this year, a level not seen since 2013. The amount spent by investors in the latest three-month period represents a mere 15 per cent of the 10-year average of €1.0673 billion while just 20 deals of note took place in the latest quarter compared to the average of 55 recorded in the equivalent period during the last decade.

The average deal size also fell from a 10-year average of €20.4 million to €8.1 million. But while the latest quarterly numbers are down significantly on the averages of the last decade, they still manage to outstrip the investment spends recorded in the depths of the financial crisis. In 2009, for instance, just €137.47 million was invested in Ireland’s commercial property market during the entire year.

[ ‘Disorderly’ commercial property crash a key risk for financial sector, Central Bank warns ]

The private rented sector (PRS) market accounts for the most valuable deal so far in 2024 with TPG Angelo Gordon and Carysfort Capital securing about €42 million from the sale of 104 fully let apartments at the Shackleton Park scheme in Lucan, Co Dublin, to German investor KGAL’s Core 5 Life fund. The retail sector has proved to be the most active area of the market, accounting for 42.7 per cent of the value of all investment. The €30 million sale by the Cosgrave Property Group of Gulliver’s Retail Park in Santry to a group of private investors was the most valuable retail transaction to have been completed in the first quarter, followed by French investor Iroko Zen’s €25 million purchase of Kilkenny Retail Park from Aviva’s Irish Commercial Property Fund.

But while the market for retail parks and shopping centres may be relatively vibrant, with the sales of both the Blanchardstown Centre and The Square in Tallaght expected to transact in the coming quarters, investor appetite for offices remains very much subdued.

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According to the latest statistics, the €4.4 million sale of Athlumney House in Navan, Co Meath, to a private Irish investor is the most valuable office investment to have been completed so far this year. The building, which serves as the headquarters of the Garda human resources directorate, accounted for 3 per cent of the latest quarter’s overall investment spend, while the overall office sector accounted for a paltry 7.8 per cent of the money invested.

The outlook for office investment is expected to recover somewhat in the upcoming quarter with the €39 million sale by State Street Global Advisors of 40 Molesworth Street to German investor Deka Immobilien expected to complete during the period. The sale, which is understood to have also attracted bids from Australian-headquartered Macquarie Asset Management, HIH Real Estate and MEAG, is expected by market observers to help provide a pricing benchmark both for buyers and for vendors.

The industrial and logistics sector, while popular with investors, continued in the first quarter to be dogged by a chronic lack of stock for sale. This was reflected in the value of sales within the sector, with just €8,731,800 worth of industrial and logistics assets (5.4 per cent of overall investment) changing hands in the three months to the end of March. The remaining 0.6 per cent of investment spend was accounted for by properties outside of the main sectors.

Commenting on the figures for the first quarter, Peter Flanagan, head of capital markets at BNP Paribas Real Estate, said: “These numbers reflect a continuation of the marked slowdown in activity experienced since the second quarter of 2022. There are signs, however, that we are entering a new cycle with significantly increased investment activity expected in the upcoming quarter based on levels of transactions agreed both on and off-market. The retail sector is currently leading the way due to attractive pricing and a steady supply of assets for sale across retail parks, shopping centres and the high street.”