The struggling Irish real estate market has been dealt a new blow by the collapse of the sale of the country's largest shopping centre. Aviva Investors confirmed on Friday that negotiations to sell the 44,000-m[sup]2[/sup] Liffey Valley centre to F&C REIT and Area Property Partners have been halted.

The struggling Irish real estate market has been dealt a new blow by the collapse of the sale of the country's largest shopping centre. Aviva Investors confirmed on Friday that negotiations to sell the 44,000-m2 Liffey Valley centre to F&C REIT and Area Property Partners have been halted.

'Aviva Investors and its partner Grosvenor have withdrawn Liffey Valley Shopping Centre Dublin from the market having failed to reach an agreement on acceptable terms with potential purchasers. The centre will be retained, with Aviva Investors continuing to perform the role of asset manager,' the global asset manager for insurance giant Aviva said in a statement.

The other parties declined to add to the Aviva statement. But it is understood the deal has been stalemated - though not necessarily killed off - by proposed changes to leases agreements that threaten to limit rental growth.

The uncertainty has been created by Fine Gael and labour, the main opposition parties in Ireland who are tipped to oust the current government in upcoming elections. The two parties have vowed to retroactively extend an existing ban on new upward-only rental revenues to leases signed before 2010.

The proposed change is intended to help struggling retailers but it makes life a lot more difficult in the real estate sector. As one source in the Liffey Valley talks told the Financial Times: 'If you look at the manifesto of the parties in Ireland, it makes it very difficult to transact at the moment given uncertainty over rental levels.'

F&C and Area entered negotiations to acquire the shopping centre from Aviva Investors and Grosvenor for about EUR 350 mln last year.

The collapse of the Liffey Valley sale came a day after the Irish market was buoyed by the announcement that Google is to buy Montevetro - the tallest commercial office building in Dublin - for about EUR 100 mln. The vendor is listed property company Real Estate Opportunities.