In the very early days of 2025, the optimism was real and well-founded in the commercial real estate investment market.
Interest rates were working their way down rapidly as the European Central Bank made successive rate cuts in its bid to achieve a target rate of 2 per cent inflation was broadly under control, the return-to-office mantra was gathering momentum and the fundamentals of the Irish economy and demographics remained compelling.
This optimism was shaken after Donald Trump’s inauguration on January 20th as the barrage of mixed messages from the new US president regarding trade tariffs took hold. The so-called Liberation Day announcements on April 2nd added to the uncertainty for US businesses in Ireland and Irish businesses trading with the United States. This ultimately led to critical business decisions being put on hold here in Ireland and elsewhere, which had a knock-on impact on investment volumes during the first half of the year.
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By the third quarter, tariff matters had settled down and business decisions were being made again. The Irish MSCI Property Index reached a point of stabilisation by this time, with value changes across all sectors coming in at -0.06 per cent. This should herald a turning point in the value cycle and confirm the attractiveness of real estate to investors. Coupled with Ireland’s strong economic and demographic data points, this has led to strong international demand, particularly from French investors.
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By the end of the third quarter, total investment spend had reached almost €1.6 billion and TWM estimate a strong final quarter is in prospect which could bring the total figure close to €2.4 billion. While a positive number, it is still a long way short of the 10-year average of just over €4 billion.
This year marked the notable return of offices as one of the most invested asset classes, along with retail. Industrial and logistics remained strong throughout the year and, as of now, there are three significant portfolios on the market, one of which is likely to complete in 2025. In a further indication of the strong demand in this sector, TWM advised ICG Real Estate on their off-market acquisition of a €65 million portfolio of eight assets in Park West, Dublin 12, from Harcourt Developments.
PRS residential investment also reappeared in the second half of 2025 as the various Government measures relating to rent restrictions, VAT rates and design standards began to take effect. In the third quarter, residential was the most invested sector, overtaking offices and retail for the period.
In terms of the outlook for 2026, TWM believe that all the traditional sectors of offices, retail, industrial and residential will continue to perform well, for all the reasons outlined previously. The demand will not be consistent, however, as factors such as ESG credentials and capex requirements will dictate the depth of interested buyers on specific assets.
When we consider the number of bidders and amount of capital that have bid recently on the various industrial and logistics portfolios, it is fair to say that there is significantly more demand than supply right now, and this may well lead to tighter pricing in this sector in the year ahead.
TWM believe that healthcare will continue to emerge as a sector of interest for investors. Deemed to be an alternative asset class until relatively recently, our analysis shows that healthcare investment remains a resilient and maturing sector, contributing to overall investment volumes. The sector’s combination of strong yields and larger deal sizes continues to attract both private and institutional capital.
- Willie Norse is managing director of TWM
