The Dublin commercial property market has been mired in a slowdown for some time now. It’s a cyclical industry at the best of times, but the slump since the pandemic shows little sign of improving, even if there have been indications the amount of office space companies are renting out has increased.
If you want to get a real sense of where things stand in the office market in particular, you could do worse than adhere to that timeless phrase: follow the money.
Two recent examples stand out. First, this week’s statement from Starwood’s European Real Estate Finance Ltd.
In essence, due to what the company called “challenging local office market dynamics” in Dublin, it had written down a loan tied to offices here by 50 per cent.
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There are a few things to note about this. Part of the writedown was due to the need to invest in the buildings to upgrade them to grade A standard and retain tenants when their leases expire, among other items that cost money to implement. The value of the writedown is also relatively small at €12.9 million, but 50 per cent is a big projected loss by any measure.
Second, the Beckett building in the north docks is close to being sold for about €35 million, The Irish Times has reported. That is a whopping 56 per cent discount to the price it was put up for sale at in January 2023, and a 65 per cent cut on the €101 million it sold for in 2018.
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To be sure, there are no doubt specific circumstances around that building. As a receiver sale, it was already a distressed asset so buyers may have been better-placed to drive a hard bargain, for example.
But these two cases make clear the office market is not out of the woods by any means. References to “challenging market dynamics” and the like will no doubt be familiar to people who have seen the market turn in the past. Cantillon vividly remembers similar phrases from 15 or so years ago.
The commercial property market is in nothing like the slump of back then, but it clearly remains in a downturn.
