Commercial real estate investment shows signs of turning

The Irish commercial property sector is showing signs of stabilizing and may even see an increase in capital value in the second half of this year. That’s the view of Niall Gargan, Head of Research at JLL Ireland, based on his analysis of the JLL Irish Property Index.

The index showed retail rents were virtually unchanged in the second quarter of this year, leading to a 0.2% rise in rents in the first half.

While the value of retail capital fell 3.2% in the 12 months to June, this is a marked slowdown from annual declines in the first two years of the pandemic, when they fell by 15.3% and 12.3% in 2020 and 2021.

Despite recent concerns about the impact of soaring energy inflation on the sector, Gargan points out that: “Occupant demand has increased in recent months, despite the easing of the economic outlook, and this has reflected in lower vacancy rates. Moreover, despite declining consumer confidence, the number of debit card transactions was 22% higher in July 2022 than in the same month in 2020. These are factors contributing to an optimistic outlook for the retail sector if no additional economic shocks occur.

The index also provides insight into the residential investment market. He oversees a portfolio of three such properties with a combined value of nearly 102 million euros. Their rents rose only 0.8pc in the second quarter, which reduced first-half growth to 2.5pc and year-on-year growth to 1.9pc.