Turnover in the Irish investment property market dropped almost 70% last year to €1.85bn when compared to 2022 – the lowest since 2012.
A new report by BNP Paribas shows that just 114 deals were carried out in the 12 month period, well below the ten-year average of 223.
Between October and December, turnover reached just over €434m, the slowest fourth quarter in over a decade.
Only 27 deal were signed in the three month period, and one transaction accounted for more than half of total spending.
“Seasonal dynamics could not rescue a dismal year for the market,” said John McCartney, Director and Head of Research BNP Paribas Real Estate.
“2023 petered-out with a whimper,” he added.
Today’s report states that a ‘transactional logjam’ caused by mispricing is holding back transactions.
“Globally, the macro- economic backdrop has become less supportive of occupational property markets,” said Mr McCartney.
“In Ireland the scale of multinational activity makes it hard to get a definitive read, but two of the more insightful barometers – Modified Domestic Demand and unemployment – appear to be trending weaker,” he added.
The report also states that sector-specific challenges are impacting on occupational demand.
“For offices, these include remote working, the tech-industry re- set, and the disproportionate impact of these global factors on Dublin because of its reliance on tech,” Mr McCartney said.
“For retail and residential, the challenges include online shopping and rent control respectively.”
While no immediate recovery is expected, the report states that market conditions should improve later in 2024 because of expected interest rate cuts and improved liquidity as forced sales come through.
When it comes to turnover by sector, today’s data shows a shift in the sectoral distribution of investment spending.
“As recently as 2020, offices and residential accounted for 82% of the annual investment total,” the report states.
“However, the share of both has been in decline since then.”
In the final quarter of last year, only five offices traded.
These included the Chancery Building in Dublin 8 which local buyer Eamon Waters purchased from Credit Suisse at a price believed to be around €14m, and Building 8 in the South Dublin suburb of Cherrywood, which is fully let to Laya Healthcare, and was bought by La Francaise for €13m at a net initial yield of 5.49%.
Over the full year, 20 office assets traded, adding to a combined spend of €386m.
“This represents the smallest flow of office investment since 2012,” the report states.
Meanwhile, residential investment slowed from an average of nearly €2bn per year between 2019 and 2022, to just €433m last year – the lowest out-turn since 2017.
In contrast, investment into Irish logistics and retail property continued to rise.