Irish Investment Activity Has Slowed But It Will Pick Up — If Sellers Are Realistic On Pricing

Q1 2023 was quiet for Ireland’s commercial property investment market, but investors are waiting on the sidelines for the right opportunities. These are the main findings from Colliers’ Ireland Capital Markets Q1 2023 Report.

“There is a wall of capital waiting to invest, but sellers need to be realistic,” Colliers Head of Capital Markets Michele McGarry said. “The pool of buyers is undeniably smaller than this time last year. For activity to pick up during the rest of the year, we need to see adjustment to pricing.”

Irish commercial property investment turnover reached €626M in Q1 2023, down 18% year-on-year. This reflects the global slowdown in investment activity linked with market uncertainty and rising debt costs. Against this backdrop, Colliers expects market conditions to remain challenging until at least the end of the summer, McGarry said.

“As the market is small, the lack of transactional evidence in the office sector in particular means that it is difficult to see where prime office yields will land,” she said. “There is a gap between investor and seller expectations. As transactions complete, the market will be able to bring more reality to pricing so assets aren’t left on the market having been priced before interest rates rises.”

Of the investment deals that did take place in Q1, it is notable that there were two new international investors making their first Irish acquisitions, McGarry said. These two transactions accounted for some 30% of the Q1 turnover.

Pontegadea, the Spanish family office of Zara founder Amancio Ortega, acquired a prime private rented sector development — Opus at 6 Hanover Quay — for a price in the region of €101M. Ingka Investments, the investment arm of Ikea’s parent company Ingka Group, acquired three units at Greenogue Logistics Park for a price in excess of €100M. One of these will be home to Ikea’s first Irish customer distribution centre.

Despite slower investor activity, the occupational market remained strong in Q1 in certain sectors, particularly in the industrial and logistics sector. A lack of supply is offsetting the impact of interest rates rises.

The office market has seen significant turbulence in line with challenges in the U.S. tech sector and the continued evolution of hybrid working, McGarry said. Q1 take-up was just 11% of last year’s total and evidence from Colliers’ Business Space team said that more than 2M SF of ‘grey space’ available for sublease or assignment is now on the market from companies like Meta and LinkedIn. 

“This, along with increased focus on ESG, is impacting investor demand for office assets,” McGarry said. “However, it is worth noting that ESG is now a top priority for buyers across all asset classes.”

McGarry said that several trends are likely to impact investment activity over the coming months. The first is the high number of French buyers looking at the Irish market. They are looking at a diverse range of assets, including industrial, retail and healthcare, as they search for high yields. 

“While they might also look at opportunities in Spain or the Netherlands, they favour Ireland over the UK due to the economic landscape,” she said. “Colliers works with many French investors and though some haven’t traded yet, they are doing their groundwork. We expect activity this year.”

Another trend in the Irish market is repositioning, McGarry said. Investors are increasingly looking for assets in good locations that can be converted to other uses such as residential, data centres or life sciences.

“Investors are taking a dim view of vacant offices at the moment,” she said. “They favour repositioning. However, the current high cost of construction and a mismatch in buyer and seller expectations means that some assets are remaining on the market.”

This article was produced in collaboration between Colliers and Studio B. Bisnow news staff was not involved in the production of this content.

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