In what was a good year for financial markets overall, did investing in Irish Commercial Property work for investors in 2025?
One thing I’ve noticed about fund returns in the year just gone is that, irrespective of the specific asset class, there has been a wide range of returns among funds within the same sector.
For example within highly rated Global Equity funds, available on the Irish market, there is a performance gap of 14% between best and worst fund. And these are all funds with precisely the same objective.
Even within Bond funds we can see a wide gap in performance outcomes.
The drivers of the gap I suspect are the concentrated nature of stock market returns in the year and the role of a weaker US dollar depending on investment managers’ currency policy.
Irish Commercial Property fund returns are tighter but there is still a gap. Some of the larger Institutional offerings delivered returns in the 3% range for the year. At the quality end of the spectrum we have IPUT who delivered a 7.5% total return for 2025.
How does a return of 7.5% compare to other options?
Multi-asset funds are probably a reasonable representation of investor portfolios. The average return of the major multi-asset funds available here in Ireland in 2025 was just below 7%. Rubicon Consulting in their investment survey calculate an average multi-asset fund return of 6.8%. Looking at Longboat Analytics the average of highly rated multi-asset funds over the past 12 months was 6.9%.
So the better performing Irish Commercial Property funds can hold their own in such company.
So how does the land lie for 2026?
Office still dominates in the sector allocation of most funds. In this sector, yields are still relatively attractive. Prime office is around 5%. In major European centres prime yields are below 5%. Income will continue to be an important part of total return for investors.
There may also be scope for rents to rise, as supply of prime sustainable space will be tight over the next 18-24 months. Such space is commanding rents of about €62 per square foot (psf). If demand holds up, this could edge towards €64/€65 psf.
Office vacancy rates have come down somewhat. For Dublin as a whole we’re probably looking at a rate below 17%, but the central business district is about 2-3% below this. What matters though is the quality of that stock from an environmental and sustainability perspective.
So there are several market factors which are supportive of further advances for the asset class.
Another factor impinging on the office property market is the Return to Office trend, which has shifted up a gear in 2025 and, based on surveys, is likely to shift further in 2026 and beyond. Large employers like the banks have tightened their rules around hybrid working. The pendulum feels to have swung somewhat.
So the internal dynamics of the Irish Commercial Property market seem supportive.
The key risk is the one I’ve alluded to before. It’s important that global and domestic economic activity, business confidence and investment plans remain intact. And much of this is beyond our control. The very fluid nature of US trade and economic policy is a global risk.
And one that can play a role in how property, and indeed most assets, perform.
Tradewinds 