The Irish commercial property market witnessed a significant revival in the second quarter, as per data from property agent Sherry FitzGerald. There was an impressive leap in investment activity, amounting to €523 million, a sharp contrast from the preceding quarters which saw a slump to a record low of €163 million.
Transaction activity also exhibited a surge during this period, with 34 sales successfully closing, marking the highest transaction numbers since the third quarter of 2022. Jean Behan, the head of research at Sherry FitzGerald, cited the improved economic scenario as the key driver behind this turnaround.
The second quarter showcased a heightened market confidence, steered by lower interest rates, an upbeat economic forecast, and attractive pricing, setting the stage for a comeback. An uptick in the scale and value of investments, including an increased number of large-scale investments, underpinned this recovery.
The retail sector emerged as the frontrunner, accounting for 27 per cent of capital expenditure, equalling €143 million, the highest retail investment in two years. This was primarily due to a string of retail park transactions, with the notable one being Corum’s acquisition of Mahon Point Retail Park in Cork for a presumed €50 million. Two additional retail parks in Letterkenny and Killarney also changed hands during this period, cumulatively fetching €40.5 million.
Office assets contributed 16 per cent to the quarter’s turnover, corresponding to €81 million as compared to an almost €13 million investment in the early part of the year. The notable deal was Deka Immobilien’s purchase of 40 Molesworth Street in Dublin 2 from State Street for around €37.5 million.
The residential property sector also garnered nearly €81 million of the investment spend during this quarter, which included the largest transaction of the period. This featured an off-market deal of a sizeable apartment complex in north Dublin, sold for €70 million.
The healthcare sector has seen a surge of activity, with transactions totalling nearly €77 million. Among these transactions was the sale and leaseback of a trio of nursing homes in Portmarnock, Portlaoise, and Kilkenny by Emeis Ireland to Healthcare Activos. This particular deal saw a sum of €56.7 million exchanged.
According to Sherry FitzGerald, there has been a significant change in the scale of transactions. This period has seen a large drop in the volume of transactions falling between the €1 million and €10 million brackets, coming down to 53 per cent. This is a distinct shift from the previous quarter’s value of 80 per cent and is also below the long-term quarterly average of 63 per cent.
However, 21 per cent of transactions fell into the €10 million to €20 million category, surpassing the average rate of 12 per cent for this range. There were also transactions valued at €50 million or greater, accounting for approximately 9 per cent.
Sherry FitzGerald’s Commercial and Residential Investment Director, Ross Harris, has predicted a steady revival of transactional activity in the broader Irish investment market throughout the year. Harris saw the return of significant private rented sector transactions as a positive sign that institutional-style capital remains dedicated to backing the Irish residential rental scene.
Still, Harris highlighted that it’s important to remember the influence of residential rent caps on institutional investors with interests in Ireland. Harris predicts an increase in investor confidence boosted by at least one more interest rate cut by the end of the year.
Harris also noted a high volume of properties that were agreed for sale by the end of the quarter. This is anticipated to drive higher transaction levels in the second half of the year. Nevertheless, it is not expected that the yearly turnover will meet the long-term average for this year.