The commercial real estate investment market is expected to experience the second strongest year in its history

2021 has been a mixed bag; a marathon rather than a sprint. At the start of the year, we had full containment, no international travel, no vaccines and, in the world of commercial real estate, no investors or occupants.

Silver linings? Well, there is no comparison between the impact of the coronavirus on investment volumes and that of the 2008/9 global financial crisis across Europe. In addition, the corporate tax negotiations in Ireland, which represented uncertainty in the market, are resolved.

While we still have the evolving pandemic, the lingering uncertainties of Brexit, the return of inflation and the difficulties in the supply chain, there is cause for optimism.

Volumes remain high as today’s credit conditions are not tight. Investors do not expect major price deflation for safe assets in most markets. The money is there, and definitely king, and there’s the usual fourth quarter flurry to get year-end deals right down the line.

Relative value continues to attract capital to Ireland. Investments in commercial real estate have doubled, from 1.8 billion euros in Q1-Q3 2020, to 3.5 billion euros for the same period in 2021. 140 investment transactions in Q3 have already exceeded the figure of 138 in full year 2020. Almost 800 million euros of real estate assets traded in the third quarter alone, which represents an increase of 14% year-on-year and 12% above the five-year average .

Two star players

The pandemic appears to have affected the supply side of the equation, as opposed to the demand side, as the private rental sector (PRS) and logistics were the new star players in the investment arena.

PRS has accounted for 54% of trade during the year to date, with 4,107 units purchased. The huge investor interest stems from Ireland’s strong population growth which will support long-term demand. Likewise, rents are at a high starting point, providing leeway for a future slippage and mitigating the risk of political intervention controlling rental growth. Residential investment is also seen as socially responsible, so tick the “environment, social and governance” box.

Logistics investment is on track to reach its highest level of the year; no surprise with the rise of e-commerce, which is driving demand for supply chain services. Rents have risen and will continue to rise, and yields have and will continue to compress. Consumer demand for internet sales will not abate and traditional retailers are improving internet solutions.

Investment in retail has been on the decline since 2019, but has experienced a more solid third quarter with 110 million euros invested. There are “40 Shades of Retail” with some sub-sectors more attractive than others. Blue-chip returns for shopping parks and neighborhood centers, for example, contract in France, Germany and Spain, so this is one to watch in 2022 as smart investors profit from the comparative price dislocation by compared to other asset classes.


The Dublin offices posted a good recovery in the second and third quarters, as did other cities in the EU. 2021 was the best year for office development since 2008, with over 200,000 m² (2.1 million square feet) of quality, energy-efficient commercial infrastructure delivered.

The office vacancy rate has fallen from 5% in 2019 to 10.7% today and will peak at around 14% in 2022. Rents are down by around 7.5% and the market will continue to move in favor of tenants in 2022 and 2023.

Offices are undergoing a similar structural change to retailing five years ago, but blue chip, best-in-class properties are still the darling of major investors.

Overall, with 3.5 billion euros in turnover to date, and potentially 5 billion euros for the year, the market is robust and suggests strong liquidity. Remarkably, we could have the second strongest year on record and continued growth, as supply realigns with demand.

Kenneth Rouse is Managing Director and Head of Capital Markets at BNP Paribas Real Estate in Ireland