Vendors hold off on property sales amid Brexit concerns
Fears around a Brexit have driven down activity in the commercial property market in Dublin, as vendors wait until there is certainty around the future of the United Kingdom and its role in Europe.
The UK will vote on June 23 on whether or not it should remain in the European Union.
While Ireland may benefit from a so-called Brexit if firms in the City of London relocate businesses here for access to the EU, the upheaval it will cause could cause huge problems for the Irish economy.
Think-tank the ESRI estimate that a Brexit could end up cutting trade between the UK and Ireland by a fifth and have a huge knock-on effect on the Irish economy.
Nama has maintained that the uncertainty is encouraging big investment funds to park money here rather than in the UK, but when it comes to direct property sales, the big European pension funds are hesitating before they pull the trigger on deals here.
"Brexit and all that could entail has created a bit of a block in the system at present," said one Dublin property agent.
"We are seeing a number of European funds which would be more conservative than their American counterparts holding off a little bit before they invest right now.
"That has fed through to sellers who are inclined to wait until there is more clarity. Nobody wants to have a property on the market for a long period of time and vendors are happy to hold off for now in order to avoid that scenario," they added.
Activity in the commercial property market in Ireland lagged the rest of Europe in the first quarter of 2016, as the market slowed sharply across the continent.
Real estate deals worth about €781m were closed in the first three months of the year - a decrease of 51pc year-on-year. While that decline is expected given the record volumes that have been seen over the last three years, the scale of the drop is far worse than the rest of Europe.
According to CBRE, Ireland was the second worst performing of 16 European markets it tracks. Only Norway fared worse, where the value of deals in the first quarter this year is down 53pc compared to the same stage in 2015.
In value terms, Irish deals totalled €1.6bn a year ago.
That put Ireland ahead of the likes of the Netherlands and Denmark, and just behind Italy.
Now though the Irish market is ahead of Portugal and well behind Norway.
It appears that the Irish market may be returning to more "normal" levels after nearly a decade that has seen the trough of the crash and the peak of huge portfolio sales.
"When comparing this year to last year we are clearly coming up short," said CBRE.
"However 2015 was a record year for commercial real estate investment.
"Looking at historic levels of first quarter investment activity, the first quarter of 2016 was in fact the third best recorded, topped only by 2015 and 2007," the broker said.
As would be expected, the UK property market has taken the biggest hit ahead of the referendum, with the value of deals in Q1 this year more than €6bn lower than a year ago.