Economists have predicted that the Irish Commercial property market is set to fall by 10BN euros over 2023, the question on everyone’s lips is why?
Rising Inflation and interest rates
Commercial Landlords suffer when interest and inflation rises, there is a direct correlation between interest rates increasing and profitability of commercial real estates decreasing.This is due to increased labour costs and property development slowing down.
Why are rates rising in ireland?
Irish rates are levied on the ECB (European Central Bank). The role of a Central bank is to try and keep consumer price increases as close or lower than 2%.
According to statistics last year, the ECB was running at 10% inflation which is 500% higher than its target.
In order to combat inflation, the ECB’s main tool at its disposal is to increase interest rates.
Inflation is also being driven higher by a sharp increase in global energy prices, until Europe identifies a more competitive supply of energy, inflation will be likely to continue to rise, which will in turn drive up interest rates further.
A Weakening Demand
The demand for Irish commercial real estate has been decreasing in the final quarter of 2022. There are many factors to consider, the most prominent of which is the forecasted value of commercial real estate is set to fall between 10-20pc over the course of this year.
Other Factors are the rising interest rate and inflation makes real estate less attractive to outside investors.
Commercial Landlords Leaving Ireland
Covid restrictions decimated Ireland commercial real estate, in particular retail. Coupled with lower prices from large online retailers, it caused alot of chains to consider alternative locations and leave Ireland altogether.
2022 continued with this trend as iconic areas in the countries capital reaching an all time low in terms of commercial occupancy.
Commercial Landlords in 2023
Although there are some negative factors on the commercial real estate market, it is still a very profitable area.
And with major high streets such as Grafton street in Ireland reaching 100% occupancy, from major best in class retailers – it’s clear investor confidence is returning despite downward pressures.
Although rising interest rates and increasing inflation is rising, it will be temporary and affects all of Europe, not just Ireland.
Commercial Property Managers Dublin
With the ever changing legal and regulatory requirements, it can be daunting to look at commercial real estate as an investment.
KPM Groups primary function is to reduce your need to be involved in the day-to-day monatomy of managing your investment, while maximising your profits.
KPM has helped countless commercial landlords increase profits while decreasing their involvement in an ever changing industry.
If you own commercial property, or are considering purchasing, the experienced team at KPM Group can help from the offset, we can locate your ideal property, find ideal tenants, collect rents and everything in between.
Why not call us for a free consultation – 01 8442400
