Sharp drop in Irish property investment deals brings 'dismal' 2023 to an end

Sluggish trading in 2023 expected to cast a shadow on the market this year

Significant high-street assets acquired in Cork last year included the North Face store at 39 Patrick Street and the McDonalds restaurant on Winthrop Street. Picture: Larry Cummins

The final three months of 2023 was the slowest quarter in over a decade for property transactions in Ireland, with US and UK investors taking a step back from the market.

The fourth quarter historically accounts for 37% of the year’s investment property spending as bonus culture and tax changes create an urgency to get deals signed. 

However, according to the BNP Paribas Real Estate Ireland’s latest report, seasonal dynamics could not rescue a dismal 2023, and just €434.6m of property changed hands between October and the end of December — accounting for just 24% of the year’s total. It represented a 59% year-on-year drop.

Deals for properties in Dublin dominated the top investment list for 2023, with the second phase of the Baldonnell Business Park topping the list at €225m. The sale of the Douglas Court Shopping Centre to the O'Leary family for €21.5m, as first reported in the Irish Examiner, was the third and the only property outside Dublin on the list.

"2023 faded out meekly, with just €434.6m of assets trading. Indeed, this statistic probably flatters the reality, as one transaction accounted for more than half of total spending," BNP Paribas Real Estate Ireland director and head of research John McCartney said.

Turnover for the full year reached €1.85bn, a 69% contraction compared with 2022, and the lowest out-turn since 2012. Just 114 deals were done in 2023. This compares with a 10-year average of 223, and with a high-water mark of nearly 300 deals in both 2014 and 2016.

The analysis found core international buyers were now on the sidelines, and with US and UK capital flows turning negative, domestic buyers accounted for 28.5% of spending during 2023 — their highest share since 2018.

Logistics and retail

Logistics and retail were the two bright spots. Deals for logistics properties attracted over €520m of capital and, for the first time, topped the investment league table at 28%. 

Investment in retail properties jumped from €359m in 2022 to €407m last year, propelling retail’s market share to 22% — its highest since 2017. 

The report states 11 properties on Dublin's prime retail streets changed hands in the second half of the year, with a similar situation occurring in Cork with high-street assets being acquired including the North Face store at 39 Patrick Street, and the McDonalds restaurant on Winthrop Street.

Residential and office investment deals both fell — despite controversy over foreign funds acquiring housing assets, the report shows residential investment slowed from an average of nearly €2bn a year between 2019 and 2022 to just €433m last year. 

Office share continued to decline and has approximately halved since 2019/2020. Over the full year, 20 office assets traded, adding to a combined spend of €386m — representing the smallest flow of office investment since 2012.

The report notes no prime, new-build offices have now been bought since the third quarter of 2022.

The sluggish trading in 2023 is expected to cast a shadow on the market this year. 

"While no immediate recovery is expected, market conditions should improve later in 2024 because of expected interest rate cuts and improved liquidity as forced sales come through," Mr McCartney said.