The commercial lending market in Ireland has experienced significant growth over the past decade. From the recovery following the financial crisis to the impact of Brexit and Covid-19, the dynamics of the market have evolved. In 2024, Ireland’s property sector continues to face both challenges and opportunities, with shifting demands in residential and commercial spaces, rising interest rates and increased focus on sustainability.
In this blog, I will explore the current state of the Irish real estate market, highlighting the key trends shaping the sector and what challenges buyers, investors, developers and for us as lenders face in the market.
- Residential Market: Supply vs. Demand
Housing Shortage
Ireland’s housing shortage remains a critical issue in 2024, as demand continues to outstrip supply. With a growing population and an influx of foreign workers, particularly in tech hubs like Dublin, there is immense pressure on the residential property market. The Irish government has aimed to tackle this issue with initiatives such as the “Housing for All” plan, which targets the construction of 33,000 new homes annually by 2030. However, challenges related to planning delays, rising construction costs, and supply chain disruptions have slowed progress.
Rising House Prices
House prices in Ireland have been steadily increasing over the past few years, with double-digit growth seen in many regions. This is driven by the limited supply of new homes, coupled with strong demand from both first-time buyers and investors. Dublin continues to be the most expensive area, but Cork, Galway, and Limerick are also seeing significant price growth as people look for more affordable alternatives to the capital.
- The Commercial Market: Wants and Needs
Office Space and Remote Work
The commercial real estate sector in Ireland is adjusting to the new reality of hybrid and remote work. During the pandemic, the demand for office space decreased as companies shifted to remote working models. In 2024, this trend continues to impact the market, with businesses opting for more flexible office solutions rather than traditional long-term leases.
Dublin’s office market remains robust, especially in the tech and financial services sectors, but there is a growing demand for smaller, more agile office spaces and co-working environments. Suburban office locations are also seeing increased interest as companies look to accommodate employees closer to home.
There has been a softening of yields in the office space driven by vacancy, higher interest rates and general nervousness for the sector. A number of high profile deals look set to transact at sub €500 psf for Grade A which may make other vendors re-adjust price expectation. The delta between the vendor and purchaser’s expectations remains although we expect this narrowing with a bias towards vendors having to wear the pain.
Retail and Industrial Sectors
Retail real estate has faced significant challenges due to the rise of e-commerce and changing consumer behaviours. Many brick-and-mortar stores have downsized or closed, leading to vacancies in retail spaces across Ireland. However, prime retail locations like Dublin’s Grafton Street continue to attract international brands, particularly in the luxury sector.
On the other hand, the industrial real estate sector is thriving. The surge in online shopping has driven demand for logistics and warehousing facilities. With Ireland serving as a key hub for European distribution, especially post-Brexit, the industrial sector is expected to see continued growth.
Foreign Investment
Ireland remains a highly attractive destination for foreign investors, particularly in commercial real estate. Dublin’s status as a European tech hub and financial centre has drawn significant interest from international firms seeking office and data centre space. In addition, Ireland’s favourable tax environment, skilled workforce, and strong legal framework make it a preferred location for multinational corporations.
Foreign investment in residential property has also been notable, particularly from institutional investors and Real Estate Investment Trusts (REITs). These investors have focused on the private rental sector (PRS), contributing to the development of large-scale rental properties, particularly in urban areas. While this influx of capital has helped address some housing shortages, it has also raised concerns about affordability and the impact on first-time buyers.
- Sustainability & Green Building Initiatives
Sustainability is becoming an increasingly important factor in Ireland’s real estate market. Both residential and commercial developers are under pressure to meet stricter environmental regulations and to adopt greener building practices. The Irish government’s Climate Action Plan has set ambitious targets for reducing carbon emissions, and the real estate sector is a key part of this strategy.
In the commercial sector, businesses are seeking energy-efficient office spaces with high environmental standards, such as LEED and BREEAM certifications. Green buildings not only reduce operational costs but also enhance corporate social responsibility, making them more attractive to tenants.
In the residential sector, buyers are increasingly prioritizing energy-efficient homes with features such as solar panels, high-quality insulation, and sustainable materials. The push for sustainability is also reflected in the government’s grants and incentives for homeowners to retrofit older properties with energy-efficient upgrades.
Conclusion
At Novellus, we are committed to providing a reliable and flexible funding solution to the market whilst taking a commercial approach to the different types of security and the overall context of a proposal. Many of our existing borrowers are opting to continue to refinance with us due to the certainty of our capital and our commercial expertise. There are many challenges in the market with affordability, supply constraints and economic uncertainty however, there are strong opportunities for growth in the commercial and industrial sectors especially.
For those looking to enter the market as an investor, or developer, understanding the above dynamics is key to making the right choices.
