In an insightful analysis by John McCartney, Director & Head of Research at BNP Paribas Real Estate, the Irish investment property market experienced a significant downturn in 2023. McCartney’s comprehensive review reveals that the fourth quarter, typically a strong period accounting for 37% of annual turnover due to bonus culture and tax changes, could not offset a challenging year, culminating in the weakest Q4 in over a decade. A mere €434.6m of income-producing property was transacted between October and December, marking a stark 69% decline from 2022, with the annual turnover reaching its lowest since 2012 at €1.85bn.
The BNP report highlights a shift in the sectoral distribution of investment, with offices and residential properties, once dominating the market, witnessing a significant decrease in their share. Notably, only five offices were traded in Q4 2023, reflecting the smallest flow of office investment since 2012 and underscoring the impact of a slowing global economy, the shift towards remote working, and the aftermath of the 2022 tech shock on the occupational market.
Despite the overall market contraction, McCartney points out a silver lining in the logistics and retail sectors, which saw increased investment activity. Logistics, driven by Ireland’s strong demographic growth and the inherent need for warehousing, topped the investment league table, attracting over €520m in capital. Retail investment also saw a resurgence, with a notable increase from €359m in 2022 to €407m in 2023, marking its highest market share since 2017. This upturn is attributed to the sector’s defensive characteristics and the attractive yields offered by well-performing regional assets.
Looking ahead, McCartney remains cautiously optimistic. While acknowledging the ongoing challenges, particularly in the office sector, he suggests that a milestone in the monetary cycle and the potential for more liquid trading conditions, driven by the easing of sovereign bond rates and the inevitability of forced sales, could pave the way for market improvement later in the year.
See the full report here: https://www.realestate.bnpparibas.ie/sites/ireland/files/2024-01/BNPPRE%20Q4%202023%20Irish%20Investment%20Market%20Report_3.pdf