Investment activity in the Irish property market reached €2.3bn in the second quarter of this year, bringing the first-half total to €3.2bn - according to new data from property advisor, Savills Ireland.

This is the largest first half total on record, 17% higher than 2021 and 11% higher than the previous record in the first half of 2016.

However, the report states that market sentiment has started to soften within certain sub sectors amongst some investors in recent months, as interest rate hikes from the US Federal Reserve and confirmation of increases from the European Central Bank have dampened investor confidence.

According to Savills Ireland, transactions are increasingly becoming harder to underwrite, with volatility in the debt markets particularly elevated at the end of the first half which has led to increased borrowing costs.

It said the undersupply of residential units, ESG-compliant offices, and modern industrial assets will continue to propel investment transactions in the commercial real estate market over the longer term.

The quarter’s largest transaction was the sale of Hibernia REIT to one of the world’s largest alternative investors, Brookfield Asset Management.

The Canadian investor bought the office-focused REIT for around €1.1bn.

Rounding off the top five largest transactions in the quarter were three PRS transactions and one CBD office deal.

The largest single asset office transaction of the quarter saw US-based LCN Capital Partners acquire three redeveloped office blocks occupied by Flutter Entertainment in the Founders District in Dublin 4.

"Investor sentiment has been impacted by the volatility and uncertainty of the global macroeconomic environment," said Brendan Delaney, Divisional Director, Investments at Savills Ireland.

"However, Ireland's commercial real estate market continues to see strong interest and transactional values," he added.

Mr Delaney said the spread between real estate yields and the risk-free rate has narrowed over the first half of the year.

"However, Ireland’s attractive yield discrepancy between itself and other European property markets provides a relative cushion to the impact of higher borrowing costs and the stronger yields on offer from the bond market," he added.