Financial Stability Note: Who invests in the Irish commercial real estate market?

19 June 2019 Press Release


  • For the first time, the resident financial sector’s Commercial Real Estate ownership is broken down along institutional lines.
  • Analysis shows the dominant role of real estate investment funds (REIFs), and to a lesser extent, real estate investment trusts (REITs), insurance corporations and pension funds.
  • Evidence of interlinkages between REIFs, REITs and the Irish banking sector are presented, and some potential financial stability risks arising from these connections, current ownership structures and funding practices, are briefly discussed.

The Central Bank of Ireland has published a Financial Stability Note examining the growing role of the non-banking sector in the Irish property market. The Note draws together a variety of internal Central Bank of Ireland sources with data published by external bodies, to help address existing gaps in data and knowledge, surrounding the involvement of entities such as real estate investment funds (REIFs), real estate investment trusts (REITs), insurances corporations and pension funds in the Irish commercial property market.

Real estate markets are important to the financial sector and the economy as a whole. While data availability in respect of banks’ real estate exposures and the risks involved in property-related lending by the banking sector have been examined extensively, the same cannot be said in respect to the non-banking sector.

Central Bank of Ireland data show that amongst the resident non-bank financial sector, Irish-domiciled REIFs held the largest share of Irish commercial property assets at the end of 2018, (approximately €18 billion), with Irish-based insurance corporations next, with holdings of just over €4 billion. Since its inception in 2013, the REIT sector in Ireland has assembled a substantial property portfolio, to the value of approximately €3.8 billion at the end of 2018. Meanwhile, data published by the Pension Authority, put the property holdings of Irish pension funds in the region of €3.1 billion or about 5 per cent of total assets.

Between them, REIFs and REITs hold almost three quarters of the resident financial sector’s investment in Irish commercial property assets. Central Bank analysis estimates that overseas institutions provide approximately half of the identifiable funding associated with these investments directly.

A greater level of foreign investor involvement in CRE markets comes with benefits from increased liquidity and risk diversification. However, the rise in cross-border flows can heighten risks to financial stability by amplifying boom-bust cycles, synchronizing the local property market with overseas markets, and providing an alternative channel through which the domestic market is exposed to international financing conditions.

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