Dublin’s office market is in a downturn, but just how deep will it be?

This time four years ago, the commercial property market in Ireland was perhaps as strong as it had ever been. Capital values had recovered in the years after the global financial crisis, and office rents had matched, or exceeded, the peaks of the Celtic Tiger years.

About €7.4 billion worth of commercial property changed hands in 2019, according to broker Savills. That was by far the highest level on record and, at the time, there were few signs of the trend changing in the near future. Office construction, driven in part by cheap debt, was continuing at pace.

It’s a very different story now. First, the pandemic lockdowns and the shift to remote working changed the environment; and while last year started well, the European Central Bank then increased interest rates in 10 successive meetings as it combated inflation. Add to those a general slowdown in the world economy and a slew of job cuts in the tech sector, and the commercial property market has entered a downturn.

“Slowdowns are a part of the commercial property business,” said John McCartney, head of research at BNP Paribas Real Estate Ireland. “The key questions are how deep will it be, and how long will it last.”

Market confidence

Up to now, the issues have not really spilt out into the open, with some notable exceptions.

A German creditor reportedly appointed receivers over the Beckett Building, an office block in Dublin’s north docklands that had been owned by South Korean investors, in September. Last week, a portfolio of commercial properties tied to developer Johnny Ronan’s Ronan Group Real Estate, including Bewley’s Cafe on Grafton Street, went into receivership on the back of loans to AIB and Bank of Ireland. Fortress Investment Group has also appointed a receiver to a smaller portfolio of five development assets tied to Ronan Group.

High-grade

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