As Ireland steers through the ever-changing landscape of the Irish property markets, the latest insights from GeoDirectory’s Residential Building and Commercial Building Reports present a compelling narrative of diverging trends. The reports underscore the disparities between residential and commercial property sectors, shedding light on the various influences reshaping the dynamics of each sector.
The prevailing narrative seems to be one of contrasting fortunes, with the residential property market seeing demand outstrip supply, while the commercial property market grapples with its highest recorded vacancy rate.
Our analysis reveals the vacancy rate for residential properties has dropped to an all-time low of 3.9%, while the commercial sector faces its highest vacancy rate on record of 14.1%, signalling an apparent oversupply.
One of the most notable catalysts for these disparities has been the enduring influence of the global pandemic. The unexpected shift in the business landscape has propelled many companies, particularly those in the tech sector, to redefine their office spaces.
The emergence of hybrid work models has prompted organisations to embrace smaller, more flexible offices. While this shift has streamlined operations and adapted to changing work dynamics, it has also had cascading effects on the demand for larger commercial properties.
Simultaneously, the retail sector has encountered its own set of challenges. The surge in e-commerce has led to a gradual deceleration in demand for retail units, compelling businesses to reimagine the purpose and functionality of their physical spaces.
High and low demand
Nevertheless, the commercial property market had critics before this time. In 2018, Irish businessman Denis O’Brien remarked on the over-building of commercial property, particularly office buildings, and believed it had reached a bubble. While his comments were dismissed at the time, the prediction seems more plausible. According to Society of Chartered Surveyors Ireland 2023 report, 53% of chartered surveyors believe the market now is in “early downturn”.
Should this market downturn happen, it may help reduce commercial property rents and increase Ireland’s attractiveness to international companies, However, empty premises rarely project a positive image.
Moreover, the high demand for residential property adds new difficulties for recruitment, and the requirement for higher salaries to meet property market prices. The risk this could be creating is an environment where our talent pool seeks greener pastures abroad, which may discourage future foreign investment.
While residential property stock has and continues to increase, the challenge of residential supply shows no signs of significantly improving in the short term. Projections by the Central Bank indicate that housing targets will be missed for the years ahead, including 2023, 2024, and even 2025. The imbalance between supply and demand is a threat to economic progress and societal well-being, a reality that is focusing policymakers into collective action.
Striking a balance
These divergent trends between the Irish residential and commercial property markets present Ireland with a complex puzzle. The lingering effects of the pandemic, coupled with the evolving dynamics of work and commerce, could result in new ways in how these markets operate.
As we navigate these challenges, it is important to strike a balance between catering to foreign investment, home industry growth, and fulfilling the pressing residential needs of Ireland’s rising population. Only through an integrated approach that prioritises both sectors can we hope to create a sustainable and thriving real estate landscape for the future.
Find out the complete findings from GeoDirectory’s residential and commercial buildings reports at geodirectory.ie/knowledge-centre
Posted: 27/09/2023 12:39:07