JLL Irish Property Index Results for Q4 2023
The JLL Irish Property Index, which has been conducted by JLL since 1969, measures returns on direct property investment and represents a typical institutional investment portfolio. The portfolio, valued at approximately €647m, consists of 53% Offices, 19% Retail, 15% Industrial, and 13% Residential.
The JLL Irish Property Index showed a decline of 0.9% in overall returns compared to the previous quarter, and annual returns decreased by 7.5%. This indicates that the market decline is slowing, as the previous quarter experienced a 9.5% annual fall. Additionally, there has been a gradual decrease in the quarterly falls over the last five quarters, suggesting that the current downturn in the cycle may be reaching its lowest point. Capital values decreased by 2.4% quarter-on-quarter and 12.8% year-on-year. This compares to the previous quarter, which saw a 14.7% annual decline. The Industrial and Retail sectors have fared better, with capital value declines of 2.5% and 6%, respectively. The Office sector experienced the largest reduction, down 16.9% year-on-year, while residential capital values are down 13.9%.
Rental values have remained relatively stable despite the challenges in the market. The ERV Index increased by 0.3% quarter-on-quarter and 2.7% year-on-year. The Industrial sector has outperformed the market with an annual ERV increase of 11.9%, the largest increase since Q4 2016, according to The Index. The Office sector's rental values have remained stable over the past four quarters with no significant changes. Retail rental values have recorded an annual increase for the second consecutive quarter, up 2.5% year-on-year.
Niall Gargan, Head of Research at JLL Ireland, said, “It is encouraging to see the JLL Irish Property Index indicate that the market is reaching the bottom of the current cycle. Uncertainty isn’t going away in 2024, but we expect to see the return of predictability in some important areas, which we think will be enough to kick-start a recovery.
The stabilising economic environment will enable investors to execute their strategies in a way they couldn’t in 2023. The return of stability and predictability to debt markets will be a driver of improved transaction activity. Clarity on interest rates will provide lenders and investors alike the conviction to stabilize pricing, which will unleash the dry powder and investment strategies which have been building on the sidelines.
Investors and corporate leaders planning to wait another year to act on medium and long-term strategies risk missing out on emerging opportunities, falling behind competitors and, unwittingly, embedding higher costs.