Ireland’s property market performed better than expected in 2021, according to the latest Outlook Report from property specialists CBRE, with “another strong year” expected for the commercial property market in 2022.

Executive director Marie Hunt said: “We expect to see continued momentum in all sectors of the Irish property market in 2022. Even sectors that have been severely impacted by Covid-19 should see transaction volumes revert back to 2019 levels over the course of the next 12 months — in essence, going ‘back to the future’."

The report says that €5.5 billion was invested in Irish real estate during 2021, of which 41% was invested in residential, 30% in offices, 18% in industrial & logistics and 6% in retail.

A key trend CBRE anticipates in 2022 is increased appetite for alternative investments.

“In addition to demand for traditional office, industrial and logistics, residential, and retail opportunities, investors will focus on investible opportunities in new sectors including data centres, film studios, self-storage, life sciences, senior housing, and alternative energy,” says the report.

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Given the sudden rise in inflation and the threat of rising interest rates, the report says significant yield movement in the Irish market over the course of the next 12 months is unlikely except in the industrial, student accommodation and hotel sectors.

Flight To Quality

The coming year will also see greater divergence in performance and pricing between prime and secondary office buildings. The ‘flight to quality’ trend, says CBRE, will increasingly see occupiers and investors favouring new and more sustainable buildings.

Marie Hunt added: “A key theme for 2022 will be increased focus on sustainability. ESG and taxonomy is now the lens through which occupation, development, investment, and funding decisions are made and we expect that 2022 will mark a step change in ESG becoming an integral factor across the full range of real estate decisions.

“As the year progresses, we will see increasing evidence of a green premium for assets that display the best ESG credentials. We will see several investors reorienting their portfolios and reducing exposure to certain types of real estate in favour of other sectors or building types, with much of this strategic change influenced by concerns about ESG.”

On the multifamily residential sector, the report criticises recent government interventions, and says that proposed restrictions on the level of leverage within Irish-domiciled regulated funds, as proposed by the Central Bank, has the potential to impact negatively on the pool of capital targeting multifamily opportunities in the Irish market.

According to CBRE, some of the items proposed in the new draft development plans for Dublin City Council and Dun Laoghaire Rathdown County Council will also pose challenges from a development and viability perspective.

*It is therefore critical that further government intervention in this sector is now curtailed, to avoid this abundance of capital opting to move into alternative investment sectors or jurisdictions,” says CBRE.

The full report is available here.

Photo (l-r): Myles Clarke (left), MD of CBRE Ireland, Marie Hunt and Danny McCoy, CEO of IBEC