Pension pots have taken a hit after two of the country’s largest fund managers slashed the value of their Irish commercial property funds.

In recent days fund manager Aviva marked down the value of its Friends First commercial property fund by 9.1pc, while Irish Life has marked down its Irish Property fund by 6.1pc.

It is understood this followed an unusually high level of withdrawals from the funds.

It is believed this has been sparked by concerns that commercial property values have peaked after several years of strong growth.

Market sources said the move was a warning to investors and advisers, who have been banking on the continuing strength of Irish commercial property.

A significant number of pension holders are exposed to commercial property in Ireland.

Aviva has warned that further withdrawals from the funds could lead to a sell-off of properties in the portfolios.

It said the decision to reduce the pricing of its Friends First Commercial Property Fund was to “protect the best interests of the policy holders who remain in the fund and follows recent outflows”.

However, it said that the property market remained strong and the fund had outperformed competitors.

The value of the fund managed by Aviva went from €618m down to €563m following the markdown.

Aviva added that it currently had no plans to sell any property in the portfolio due to liquidity concerns.

“There are two properties at various stages of the sales process, which were in train prior to the recent decision to switch the pricing basis,” said the company in a statement.

Suzie Nolan, senior property fund manager at Aviva Life & Pensions Ireland DAC, said: “Our view is that the fundamentals of the Irish commercial property market remain strong.

"The properties in the fund are actively managed by an in-house team, the Irish economy continues to perform well, unemployment is at a 13-year low of 4.8pc and the demand for good-quality commercial property remains strong from both occupiers and investors," she added.

"This change in pricing is not as a result of deteriorating fund or market performance."

However, Aviva said it moved the fund from "an acquisition to a disposal basis" with effect from Wednesday, which means it is prepared for the possible sale of properties should investors continue to cash out.

All through last year both the Aviva and Irish Life funds edged upwards, delivering good returns on paper for investors.

At the end of last year, an update from Aviva was largely positive toward commercial property but some warnings were sounded about industrial property.

"The office market achieved a record-breaking year," said the commentary in December.

"Technology occupiers continue to dominate accounting for almost 50pc of the Dublin office take up (Lisney). The Irish retail sector remains resilient, performing well compared to our UK counterparts. Footfall and turnover remain strong in most cases particularly in prime locations. Retail spending over the six-week period up to Christmas 2019 rose 3.5pc compared to the same period during 2018 (Retail Ireland).

"Activity in the industrial sector slowed towards the second half of the year as supply constraints and Brexit uncertainty surrounding trade and tariffs impacted activity levels."

Irish Life said in a statement: "The pricing basis of property funds can change from time to time and that can lead to once-off price movements as we have seen this week.

"However, the Irish property investment market remains very strong with €7.2bn of transactions completing in 2019 with continued interest from international investors who accounted for over 70pc of investment volume in 2019 representing a strong endorsement of the Irish property market.

"In our view the outlook for Irish property in 2020 remains positive as fundamental economic indicators remain stable and occupational demand for space continues. So while commercial property, like all investment assets, will rise and fall in value, we remain positive about the long-term growth potential of the commercial property market in Ireland."

Market sources described the development as significant, however.

The properties in both funds are some of the best commercial property assets in the country.

Irish Independent