Investor Demand Remains Robust for Appropriately Priced Assets

December 11, 2023

By Kyle Rothwell


In September, the ECB raised their base interest rate by a further 25 basis points, with the main refinancing rate now standing at 4.50%. This was the 10th consecutive interest rate increase by the European Central Bank in this cycle. The impact of higher interest rates on investment volumes and real estate pricing has been significant in 2023. By the end of Q3, Irish real estate investment volumes totalled €1.4bn, leaving the market on course for full year spend that will likely be less than 50% of the 10-year annual average of €4.3bn. Nevertheless, the Irish market is not an outlier, investment activity across Europe is also down significantly. In the same period to Q3, European real estate investment volumes were down c. 60% across all sectors. In line with the rest of Europe, commercial asset pricing in Ireland has adjusted considerably over the last 12 months. Prime yields in the Irish market have drifted and in many instances are continuing to trend ‘weaker’.


It is widely acknowledged that the rise of flexible working patterns has led to a dampening in demand for office space, however it may not be by as much as many anticipate, particularly at the prime end of the market. We continue to see a bifurcation in the Dublin office market with positive occupier demand for high-quality, sustainable, and well-designed office spaces. Regardless, there is no hiding behind the overall Dublin office vacancy rate, which has now risen to close to 15%, its highest point since 2014.

Dublin offices, particularly older or non-core located buildings, have experienced the sharpest pricing declines, driven by a combination of the necessity to reposition buildings to meet ESG requirements and dampening investor sentiment globally. Pricing is likely to continue to adjust over the course of 2024 (particularly in H1), but once this adjustment is complete, office refurbishment opportunities in prime locations will become an interesting play for value-add investors. 

Largest Office Deal 2023: Georges Quay House, sold by CBRE on behalf of Henderson Park. It was acquired by Corum for €81m which equates to a NIY of 6.25% or approx. €775 per sq. ft.

Industrial & Logistics:

Dublin remains massively undersupplied of modern distribution and warehousing facilities, demonstrated by the vacancy rate of sub 2%. There is currently approximately. 1.3 million sq. ft of new industrial & logistics stock under construction to be delivered in the next 12-18 months in Dublin, 40% of which pre-let or reserved.

Investment in the sector continues to be strong, driven by the robust occupational market and investors searching for rental growth.

Largest Deal 2023: Phase II Mountpark Baldonnell, which CBRE sold to Pontegadea for €225m.


In a sector that should be thriving, it was certainly a more muted year for PRS sales. At the end of Q3 the total investment volume was just over €420m following spend of close to €2bn in 2022. The undersupply of residential stock across all tenures remains a key issue for the Irish government.

Largest Deal 2023: OPUS, Six Hanover Quay, Dublin 2. The vendor Carysfort Capital, sold to Pontegadea for €101m, which equated to a NIY of 4.5%. CBRE represented Pontegadea on the acquisition.

Capital Flows 2024:

By the end of H1, US$70bn had been raised for real estate capital globally and this figure has grown further in H2, resulting in a significant amount of capital ready to deploy. Of this US$70bn, 80% was raised seeking ‘value-add’ returns. In the last quarter we have observed a significant increase in value-add investors, largely private equity, looking to deploy into the Dublin market once pricing adjustments have fully bottomed out. 

In many instances, the larger European institutional funds who dominated the Irish market prior to 2023 need pricing to solidify and macro trends to stabilise before they can return to the market. This could happen in late 2024.

An Evolving Market:

In the short term the market has fundamentally changed, and the real estate industry needs to adapt to compete for a slice of global capital allocations.

When investors have the option to acquire Irish 10-year government bonds at approximately 3.0%, the industry needs to provide appropriate risk-adjusted returns. Price adjustments over the last 18 months have gone some way to improving the attractiveness of real estate assets, but more focus is required in relation to value creation through proactive asset management and focussing on ESG repositioning. Cooling inflation and slowing European economic growth means borrowing costs should come down in the medium term, making debt-backed deals attractive again towards the backend of next year and into 2025.

As an investment advisor, I will be operating in a “Capital Events Industry” in the short term. Financing maturity or end of fund life will generate liquidity events in 2024. Providing sound reasoned advice across the entire capital stack will be more essential than ever. The answer may not always be “sell”, all liquidity/refinancing options need to be considered, from injecting pref. equity to securing new senior debt.

The year 2024 could likely be another challenging year for the real estate industry, particularly in H1, but once pricing adjustments bottom out, the second half of the year will bring some of the most interesting opportunities the market has seen in many years.