Investment activity in the State’s commercial property market fell to a new post-financial crisis low in the first quarter, according to estate agent Sherry FitzGerald.
The company’s latest report on the sector pinpoints a dramatic collapse in commercial deals on the back of higher interest rates.
Echoing the findings of recent reports by BNP Paribas Real Estate and JLL, Sherry FitzGerald said investment in the sector amounted to just €163 million in the first three months of the year, the lowest quarterly level recorded since its records began in 2013.
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“It is interesting to note that investment activity during the quarter was primarily driven by smaller lot sizes, reflecting the current interest rate environment with key lending rates now at the peak of the current cycle, while a commencement in base rate reductions is expected in the second half of 2024,” the company said.
Some 80 per cent of all transactions were valued at between €1 million and €10 million while there were no transactions exceeding €50 million in value.
[ Investment in commercial real estate plummets to lowest level since 2013 ]
The largest transaction was an off-market sale of a 104-unit residential portfolio in Shackleton Park, Lucan, by TPG Angelo Gordon and Carysfort Capital to German investor KGAL’s Core 5 Life fund.
Sherry FitzGerald said residential transactions accounted for 27 per cent of total turnover in the first quarter.
Demand for retail assets comprised 42 per cent of the total capital spend. The largest transaction was the €30 million sale by the Cosgrave Property Group of Gulliver’s Retail Park in Santry to a group of private investors.
French investor Iroko Zen also acquired Kilkenny Retail Park from Aviva’s Irish Commercial Property Fund for €25 million.
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“Following a decade where the main refinancing rate was maintained below 1 per cent, it is not surprising that the successive hikes in interest rates since July 2022 had an impact on investor activity,” Sherry FitzGerald’s head of research, Jean Behan, said.
“Now that inflation in the euro area has eased considerably, it is widely anticipated that the ECB [European Central Bank] will begin a series of interest rate cuts in the second half of the year, which should help the investment market rebound later in the year,” she said.