Just over 6 months ago, I posted a piece on Irish Commercial Property wondering if there was a case to include, or add to it, in your investment portfolio.
So what’s been happening?
The commentary so far this year coming from property managers talks of a stabilizing or a re-set for the Irish Commercial Property market. That’s what the figures show as well. For the first quarter of the year, commercial property returns here were just under 1%. While not very exciting, it compares reasonably well with a typical managed fund return in the same period of about negative 4%. Equities and bonds have been challenged significantly in 2025 so far.
Deciding on asset allocation plays a big part in investor returns, but it’s always a tricky call and especially when, as now, the market environment is highly volatile. As regards overall asset allocation, for many Irish institutional multi-asset funds, allocations to Commercial Property are at the lower end of their historical range. Currently they sit around 3%. In the past they have been significantly higher.
Investing in a typical Commercial Property fund in Ireland is still very much about investing in Dublin Offices. I looked at 4 of the leading institutional property funds and the largest exposure is always to the Office sector.
| Sector | Fund A | Fund B | Fund C | Fund D |
| Office | 73% | 49% | 39% | 59% |
| Retail | 9% | 23% | 25% | 30% |
| Logistics | 15% | 11% | 20% | 10% |
So how do the investment numbers stack up right now? Yields on prime office properties are around the 5% mark – higher for suburban and secondary. 10 year government bond yields for comparison are just under 3%. This is based on a rent of about €65 per square foot.
Are rents forecast to rise? Yes – but not shooting the lights out. At the start of the year Irish surveyors were suggesting a rise of just over 1% in rent levels. CBRE, who produce solid research, are pointing to over €67 next year and €70 in 2027.
As regards supply and demand, vacancy rates, though still high, may have reduced somewhat as the Workday deal at College Square has now completed. CBRE suggest a vacancy rate for the first quarter of the year of about 19%. This is probably peak. However, anecdotally, available Grade A+ space in city-centre is much tighter.
Recent take-up has been mainly in the Central Business District, and predominantly from technology, business services and public sector.
So with prime yields of 5% or more (and possible rent increases) in an environment where interest rates are likely to fall further, and other assets may face challenges, we can see an investment case for commercial property.
However there are two mega-trends to keep an eye on and they are the same as noted in previous articles on the blog.
As a positive driver we seem to be past peak “work from home”. Last week Savills produced a survey showing that Gen Z and millennials were open to spending more days in the office, subject to certain “perks” such as subsidized canteens or gym membership. The survey found that 85% of Irish workers would spend more time in the office.
However on the negative side is the question of global and domestic economic activity, business confidence and investment plans, given the very liquid nature of US trade and economic policy. Department of Finance research last week showed how tariffs can be a hit to our GDP and to job creation. And this is before any potential developments in the Pharma sector.
This may well be the biggest single factor to consider in coming to a view on the asset class.
Tradewinds 