After a torrid period in 2023 and early 2024, some green shoots appeared visible among the latest reports from the commercial property industry – but don’t call it a bounce back quite just yet.
In separate reports this week, property agents CBRE and Sherry FitzGerald agreed that about €600 million was invested in Irish commercial property in the three months to the end of September. That represents a significant uplift on the same period last year, up almost a quarter, according to Sherry FitzGerald.
At the moment, the best the industry can say is that the worst of the dip is probably behind it. While the €600 million or so invested in the market in the third quarter represents the highest level of spending in a single quarter since the first three months of 2023, the rolling total for the year remains down by about 13 per cent due to a particularly slow start to 2024.
Some large-scale deals are expected to close in the fourth quarter and potentially push the total above the almost €2 billion spent on Irish commercial property in 2023. That’s a low bar, however, given that last year was the worst in a decade for the market.
Particularly worrying for the Government and its housing targets is that the private rented sector is yet to experience any recovery at all. Funding costs – which remain elevated after the European Central Bank began raising interest rates in 2022 – are a factor but so too is project viability amid ongoing cost challenges.
While the moribund office market has shown some signs of life, industry experts like BNP Paribas’s John McCartney expect it will take until at least 2027 for the stock added in recent times to be absorbed and for new investment to begin flowing.
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If a substantive rebound is on the cards in the near future, it is largely dependent on borrowing costs coming down as central banks continue to reverse the recent hiking cycle ushered in as a response to soaring post-pandemic inflation.
But with inflation remaining stubbornly unpredictable in some of the world’s major economies, questions marks remain about whether policymakers will be able to cut as aggressively as investors would like.
What we’re seeing in 2024 are likely to be just the “early signs” of a recovery that remains heavily contingent on a dynamic macroeconomic environment.