Ireland's Economic Growth Is The Envy Of The World. So How Can Real Estate Catch Up?

Most countries would kill for economic growth like Ireland's. Yet its real estate market remains stuck in neutral.

Economic growth and real estate growth normally walk in lockstep. But perceived risk, both geopolitical and regulatory — thanks to the economy’s high exposure to an increasingly unpredictable U.S. partner — has given some investors the jitters.

That means that despite a growing need for modern office space, and an acute requirement for housing, cranes are in short supply across Dublin’s skyline.

A rebound in both occupier takeup and investment activity is forecast for 2026. But it's a recovery that remains fragile, and subject to political decision-making that has investors on edge. 

“For international capital, the market is very attractive, given the spread on capital yield for finished product," Hines Managing Director Brian Moran said. 

"But the problem is that when assets are trading at a 5.5% yield, it means the profit is not there and it can’t be built. There is a serious viability gap because of tinkering with the investment market, which, unless addressed, won’t be sorted out.”

The situation is even more acute given predictions that the economy is set to cool. While Irish GDP grew robustly in 2025, with the European Commission estimating growth around 10.7% last year, it is forecast to come down in 2026 with a sharp drop to around 3%.

Figures that are heavily influenced by multinational corporate activities appear to have created a statistical veneer that does not necessarily reflect the domestic economy’s experience.

Modified domestic demand, which strips out volatile external components, paints a more subdued but realistic picture of internal activity, especially noticeable in the Dublin office market. After years of pandemic-related disruption and structural shifts in work patterns, office demand has stabilised but remains below what might be expected in an economy growing at an elevated pace.

And so far, the Irish economy has survived its exposure to U.S. Inc. The global digital slowdown, with the threat of mass layoffs, instead gave way to small labour force cuts that have largely concluded, while threatened tariffs and the possible relocation of the pharmaceutical sector back to North America have again not come to pass.

However, while Ireland has so far been able to breathe a collective sigh of relief, political volatility continues to hang over the economy. 

Dublin office takeup reached 2.7M SF in 2025, according to Colliers, a 21% increase on 2024 and above the 10-year average for the first time since 2019. Vacancy rates fell to 13.8% in Q4 2025, continuing a downward trend, while prime central business district rents remain stable at €62.50 to €65 per SF amid tightening Grade A supply.

“With multinationals enforcing return-to-office policies and sustainability driving occupier decisions, demand for high-quality, energy-efficient spaces is accelerating,” Colliers Ireland Director of Research Kate Ryan said of the adviser's latest figures.

But overall, leasing activity is still distributed unevenly across sectors and increasingly concentrated in core CBD locations. Firms in technology, legal and public sectors drove demand, yet speculative development remains scarce, with only a handful of office projects due for completion in 2026. 

“One of the key challenges that remains in the Irish commercial investment market is the level of transaction costs, with stamp duty at 7.5%, a cyclical high," Lauder Teacher Associates co-founder and partner Colm Lauder said.

"When set against modest income returns of 4% to 5%, this makes it very difficult to justify investment and development, as the upside is simply not there in the early years of an investment.” 

He believes Ireland's risk profile regarding the U.S. is concerning investors. While allowing for some bullish forecasts of €80 per SF for new Grade A offices in prime central locations, driven by the lack of new supply, he says the numbers struggle to stack up for many new schemes, particularly with the cost of debt still elevated. As a result, several domestic investors have stepped back from the market.

The situation is particularly acute in the residential sector, albeit for different reasons, namely politics.

The country is now less than six weeks from the implementation of the new rent rules for schemes, yet final details from the government are still outstanding, particularly in relation to the purpose-built student accommodation sector, Lauder said.

Even so, the changes amount more to a tweak than a fundamental reset. While they are welcome for standing stock, the difference for new-build development is marginal.

"In that context, a meaningful ramp-up in supply is simply not going to happen,” he said.

That said, Lauder did point to some potential bright spots. Restrictions on data centre development is easing, opening up the possibility of new schemes even in the Greater Dublin area, while the industrial and logistics market has started to move forward.

There has also been growing interest from income-focused investors, including family offices, French SCPIs, and UK buyers, particularly in repositioning opportunities across both retail and office assets.

Others believe that after 12 months largely on pause, investors will be more active this year.

Adviser JLL Ireland is bullish and, in its new year outlook, predicted that transaction volumes across Ireland’s commercial real estate market could hit €4B this year, significantly up from the approximately €2.44B transacted in 2025, as more assets come to market and deferred transactions complete.

Its report identified the living sector as the “defining theme” for 2026, driven by Ireland’s acute housing shortage. But it also predicted that the country’s capital markets will see improving liquidity, greater sector diversification and renewed international interest.

“We are seeing capital from Australia, Canada, Europe. Build costs are tapering off, and there is more clarity around regulation, plus accretive debt markets, with interest rates coming down,” JLL Capital Markets and Irish Living Lead Senior Director Niall Gunne said.

“We do have international institutions interested, but regulatory shifting sands have given them pause for caution. It’s a balancing act between protecting the tenant and attracting capital. The only way to address this is to build.”

What is clear is the economic backdrop for the real estate sector will remain increasingly and inextricably chained to political decisions as rarely before.

Deloitte Chief Economist Kate English points to the most recent Irish budget, which saw spending rise to a record high, as capital expenditure increased to a record €19.1B. As a result, she believes that debt and fiscal discipline will be a central theme in 2026 and warns that policymakers will need to strike a careful balance between the need for investment and the imperative to maintain fiscal sustainability.

She also agrees with Gunne that finally addressing new homes construction and the shortage of properties to buy or rent is crucial and stresses that this has become an issue that has had an impact on almost every Irish household, directly or indirectly.

“There is only one way to fix this: supply, supply, supply,” she said.