Irish investors spent almost €8 billion on European commercial property in 2006. New figures released from CB Richard Ellis show the commercial real estate investment market in Europe topped €230 billion last year, up 40 per cent on 2005.

Irish investors accounted for around €11 billion of this, with around €3.3 billion being spent domestically. CB Richard Ellis said it expected the trend to continue over the coming year.

In its recent outlook for 2007, the property consultants said the weight of Irish money chasing property investment opportunities will continue during 2007 and that last year's record spend would be exceeded as Irish investors strive to source good income-producing opportunities in an increasingly diverse number of locations.

Yield contraction, which was the primary driver of property returns over the past two to three years, has now stabilised in almost all European markets, with the result that property investors will now have to rely primarily on rental growth to drive returns, according to Caroline McCarthy, director of overseas investment at CB Richard Ellis in Dublin.

"Without yield contraction, it is inevitable that total returns from property investments will stabilise at more realistic rates than have been witnessed in recent years. Therefore, Irish investors who want to out-perform the market will have to adopt more opportunistic investment strategies and seek out properties that offer asset management opportunities or development angles," she said.

Ms McCarthy said she expected Irish investors to be less dominant in the UK in 2007 due to pricing. But she expected some high-profile UK properties to be purchased in the coming year, most likely UK shopping centres and prime London office properties. "Irish investors will focus more attention on core locations in Europe this year including Amsterdam, Brussels, Barcelona, Madrid and Paris," she said.

She said many Irish investors would focus on German cities, "although caution is advised if investors are making investment decisions on the back of economic prospects alone. The core focus for investors should be prime properties in locations where occupier markets are improving and more importantly where rental growth prospects are encouraging".