Irish Life Investment Managers (ILIM) plans to invest €300m in redeveloping European and Irish commercial real estate as it upgrades its outlook on property investments. ILIM expects the investment returns in Irish property to grow by an average of 4.5% annually over the next 10 years, up from 4% last year, as per the yearly update published for clients and investors. It has also upgraded its outlook for European property to 5.5%, from 4.5%.
Despite warnings about the sector's outlook, the upgrade on Irish and European property is positive news. Commercial real estate, which includes offices, is currently grappling with higher interest rates, rising vacancy levels, and a collapse in demand. Valuations have also declined to their lowest level in over a decade due to low office transactions in Ireland.
Last month, the Central Bank cautioned about the risk of a disorderly price correction in Ireland's €50bn commercial real estate market, citing it as a critical risk for the financial sector. Bank of Ireland also expects a further 15% decline in the value of commercial property assets over the next two years.
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