A new report finds that the commercial-property market in Ireland “came to a near-standstill” in the second quarter (Q2) of this year.

The report, published by BNP Paribas Real Estate (BNPPRE), shows that assets worth €333.4 million changed hands in the three months – down 73% compared with the same period last year.

“To put this in perspective, turnover between April and July was less than that recorded in any quarterly period during the COVID pandemic,” said John McCartney (director and head of research at BNPPRE).

The 73% figure excludes the €1 billion sale of investment firm Hibernia Reit in the second quarter of last year.

Asking prices

McCartney pointed out that, while nearly all European markets had experienced a slowdown in commercial property this year, Ireland ranked 24th of 27 countries in terms of the annual decline recorded in the first six months of 2023.

The report shows that there were just 26 deals during the second quarter, and only one deal worth €50 million – the first time this had happened since the first quarter of 2017.

McCartney said that asking prices had not yet adjusted to the weaker market, creating a “stand-off” between sellers and buyers that had stalled activity.

He added that two main factors had contributed to the weakness in the sector: falling property values and wider economic uncertainty. Vacancy levels were also rising in some areas – particularly offices.

Regional shift

Offices accounted for only 12.5% of total investment in Q2, as retail and logistics took a higher share of the market.

The BNPPRE report says that investors have increasingly moved outside Dublin in search of value, with spending on non-Dublin assets accounting for almost 28% of turnover over the last 18 months, compared with just under 15% between 2013 and 2021.

There has also been a shift to traditionally less-expensive sectors, such as logistics property and older office buildings.

McCartney stated that the path of interest rates would be a key factor in the outlook for the rest of the year, but added that BNPPRE believed that the price-adjustment process had “some distance to go”, and that trading would remain subdued for the rest of the year before beginning to recover in 2024.