After a period of turbulence through 2023 and the beginning of 2024, the commercial property market started to display signs of recovery, as indicated by several recent reports. Nonetheless, it’s too soon to label it a resurgence.
Both CBRE and Sherry Fitzgerald, two esteemed property agencies, have recently revealed in their reports that roughly €600 million have poured into the Irish commercial property market in the three months leading to September’s end. Compared to the corresponding period of the past year, this is an impressive increase of nearly 25 per cent, as per Sherry Fitzgerald’s findings.
At this point, the most optimistic statement within the industry is probably that the worst downturns are likely in the past. Whereas approximately €600 million invested during the third quarter marks the greatest quarterly expenditure since early 2023, the yearly rolling total remains 13 per cent lower due to a sluggish beginning to 2024.
Large transactions expected to be sealed in the concluding quarter might boost the total beyond the almost €2 billion spent on Irish commercial property in 2023. Mind you, this sets a rather modest benchmark considering that market performance in the prior year was the lowest in ten years.
Particularly disconcerting for the Government and its housing goals is the fact that the private rented sector hasn’t witnessed any recovery at this point. The stumbling block is two-pronged – funding costs have soared ever since the European Central Bank started hiking interest rates in 2022, and the viability of projects is compromised by continued cost-related issues.
Signs of progress are evident in the stagnant office market, yet industry specialists like BNP Paribas’s John McCartney predict a wait time till at least 2027 before the recently added stock is completely integrated, and new inflows of investment start.
The potential for a meaningful recovery in the near term largely hinges on lending costs reducing, as central banks persist with counteracting the recent inflation-induced hike cycle in the post-pandemic phase.
Despite persistent unpredictability of inflation in several key global economies, there persists uncertainty about the capacity of policymakers to enact as substantial reductions as the investors would prefer. Evidence in 2024 potentially indicates the initial indications of a revival, deeply dependent on an ever-changing macroeconomic surroundings.