Dublin Office Investment Has Soared But Construction Figures Indicate Slowdown

Figures from three of Ireland’s top agents show that Dublin’s commercial real estate investment market has forged ahead during 2022, but that construction is showing signs of a slowdown.

In all, a total of €1.8B was invested in Irish commercial property deals during the third quarter of this year, according to research from CBRE Director and Head of Research, Ireland, Colin Richardson.

That brings the total investment for the year to €4.9B, up almost 40% compared with the same period in 2021. The Q3 total is also significantly above the quarterly average of about €1.2B.

Separately, JLL Head of Research Niall Gargan told the Irish Independent that Q3 deals had been generated at a time of “increasing investor hesitancy due to the rise in interest rates, increasing inflationary pressures and monetary tightening across the board”.

"The increasing cost of debt is beginning to impact underwriting, yields and returns. Throughout the final quarter of the year, there will be a new phase of price discovery, leading to potentially reduced liquidity and bidding intensity moderating,” he said.

In July, Gargan said that positive sentiment had returned to the commercial real estate market and he pointed to the fact that 1.2M SF of floorspace was reserved going in to the second half of the year.

The largest transaction in Q3 was Johnny Ronan’s sale of the Salesforce office HQ and The Samuel Hotel in Dublin’s north docklands, part of a portfolio acquired by Blackstone for more than €500M. 

The second-biggest deal was Aedifica’s €161M purchase of four nursing homes from Bartra Healthcare.

However, the amount of office space under construction in Dublin fell in Q3, according to Cushman & Wakefield, with 4.41M SF of office space under construction at the end of September 2022, the lowest level since early 2021.

Its figures show that 90% of space currently under construction is in Dublin's core business district and that 37% is pre-let or reserved. Of the space due to complete in the final quarter of this year, 67% is pre-let or reserved.

Cushman & Wakefield said that occupiers are demanding more sustainable buildings, a trend it believes is likely to continue, plus locations easily accessible by public transport.