29. Juli 2010 
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Returns stabilising in the Irish commercial property market
The Dublin office of CB Richard Ellis Group (“CBRE”), the international commercial real estate firm, today launched their mid-year investment market Marketview publication for 2010, which concludes that following the most significant downturn ever experienced, there are signs of stabilisation starting to emerge in the investment sector of the Irish commercial property market.
Report Highlights
► There has been an improvement in transactional activity in the Irish investment market in the first six months of 2010 with €105 million invested compared to €41.6 million invested in the same period last year and with €92 million invested in the whole year in 2009. A number of these properties were purchased by overseas buyers who heretofore did not invest in the Irish market.
► Total returns from commercial property in Ireland have now declined 57% from peak-to-trough but are finally showing signs of stabilisation. Although total returns from the Irish commercial property sector declined by a further 1% in the first half of 2010 and rental values remain under some pressure, this deterioration represents a significant improvement on the massive declines experienced in this market since 2008.
► There is strong demand from a range of domestic and overseas buyers for quality property investment properties producing strong income. However, there is a dearth of prime properties being offered for sale and NAMA have not yet brought any investment product to the market.
► Irish investors have been net sellers of real estate in the UK in the first half of 2010 as they attempt to recoup some or all of their equity and take advantage of the recovery in UK property values.
Marie Hunt, Executive Director at CB Richard Ellis, Ireland who compiled the report said, “The Irish commercial property market is slowly starting to emerge from the biggest downturn it has ever experienced. At more than 57% from peak-to-trough, the decline in Irish commercial total returns in the most recent cycle was more severe than ever experienced in any other previous cycle, primarily as it was caused by an unforeseen liquidity crisis and the withdrawal of foreign credit to Irish banks. However, we have to remember that it is a cycle and based on what we are now seeing on the ground in the Irish commercial property market, it is a cycle we are slowly starting to emerge from”.
According to the new report, there has been a notable improvement in demand for Irish investment properties over the last six month period. In addition to very real demand for prime property from a range of domestic and overseas investors, CB Richard Ellis believe that Irish institutions are now starting to see cashflows stabilising and could shortly starting purchasing properties again. Recent sales include the sale by Irish Life of a portfolio of office properties for approximately €52 million, reflecting a yield of approximately 8.3% and the sale of a prime Grafton Street retail premises, occupied by AIB Bank, for approximately €28 million, reflecting a yield of approximately 6%. 59% of the spend on Irish investment property in the first half of 2010 comprised office properties according to CB Richard Ellis.
Sean O’Brien, Executive Director in the Investment Department at CB Richard Ellis, Ireland said, “While the Irish investment market is now showing some signs of stabilising, the UK market is at a different point in the cycle, having experienced growth of more than 15% in the 11 months to June 2010. Against this backdrop, Irish investors are taking advantage of the strong pricing in the UK market and in an effort to recover some or all of their equity have been net sellers of real estate in the UK in recent months”.
Report Highlights
► There has been an improvement in transactional activity in the Irish investment market in the first six months of 2010 with €105 million invested compared to €41.6 million invested in the same period last year and with €92 million invested in the whole year in 2009. A number of these properties were purchased by overseas buyers who heretofore did not invest in the Irish market.
► Total returns from commercial property in Ireland have now declined 57% from peak-to-trough but are finally showing signs of stabilisation. Although total returns from the Irish commercial property sector declined by a further 1% in the first half of 2010 and rental values remain under some pressure, this deterioration represents a significant improvement on the massive declines experienced in this market since 2008.
► There is strong demand from a range of domestic and overseas buyers for quality property investment properties producing strong income. However, there is a dearth of prime properties being offered for sale and NAMA have not yet brought any investment product to the market.
► Irish investors have been net sellers of real estate in the UK in the first half of 2010 as they attempt to recoup some or all of their equity and take advantage of the recovery in UK property values.
Marie Hunt, Executive Director at CB Richard Ellis, Ireland who compiled the report said, “The Irish commercial property market is slowly starting to emerge from the biggest downturn it has ever experienced. At more than 57% from peak-to-trough, the decline in Irish commercial total returns in the most recent cycle was more severe than ever experienced in any other previous cycle, primarily as it was caused by an unforeseen liquidity crisis and the withdrawal of foreign credit to Irish banks. However, we have to remember that it is a cycle and based on what we are now seeing on the ground in the Irish commercial property market, it is a cycle we are slowly starting to emerge from”.
According to the new report, there has been a notable improvement in demand for Irish investment properties over the last six month period. In addition to very real demand for prime property from a range of domestic and overseas investors, CB Richard Ellis believe that Irish institutions are now starting to see cashflows stabilising and could shortly starting purchasing properties again. Recent sales include the sale by Irish Life of a portfolio of office properties for approximately €52 million, reflecting a yield of approximately 8.3% and the sale of a prime Grafton Street retail premises, occupied by AIB Bank, for approximately €28 million, reflecting a yield of approximately 6%. 59% of the spend on Irish investment property in the first half of 2010 comprised office properties according to CB Richard Ellis.
Sean O’Brien, Executive Director in the Investment Department at CB Richard Ellis, Ireland said, “While the Irish investment market is now showing some signs of stabilising, the UK market is at a different point in the cycle, having experienced growth of more than 15% in the 11 months to June 2010. Against this backdrop, Irish investors are taking advantage of the strong pricing in the UK market and in an effort to recover some or all of their equity have been net sellers of real estate in the UK in recent months”.
