Irish commercial property returns slowed in the third quarter to 2.1 per cent, prompting analysts to conclude that upside from here will be driven by rental growth rather than capital appreciation.

Data published this week by the Society of Chartered Surveyors of Ireland and Investment Property Databank shows that annualised increase in Irish property returns was 15.4 per cent.

"After three years of abnormal growth, the return profile of the SCSI/IPD quarterly property index continued its downward trend in the third quarter," Davy analyst Ray Crowley said in a note on Wednesday, noting that the 2.1 per cent return for the third quarter marked a 36 per cent decline on previous quarter and a 68 per cent reduction year-on-year.

“The period of strong market-driven growth is now in the rear-view mirror and upside for participants from here will be delivered by increasing rent through active asset management and deal origination at accretive valuations,” he said.