03. Mai 2010 
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Signs of improvement in the Irish commercial property sector
Most of the activity in this sector of the property market is emanating from companies seeking to take advantage of the competitive terms and conditions on offer in the market. While downward pressures remain, CB Richard Ellis say that rents for prime industrial accommodation appear to have now stabilised at approximately €86 per square metre. However, they say that rents on secondary industrial accommodation continue to fall dramatically with opportunistic occupiers willing to compromise on building quality and in some cases efficiency in order to cut costs.
CB Richard Ellis say that there has been a notable increase in activity in the Irish commercial property investment market in recent months but this has yet to translate into transactional activity. According to their research, only €19 million was transacted in the Irish market during the first three months of 2010. However, they say that there are up to €500 million of transactions being negotiated at present so they expect to see transaction volumes improve considerably in Q2 and Q3. Prime yields have firmly stabilised in all sectors of the Irish market, and the most recent data from the Investment Property Databank (IPD), confirms that total returns in the Irish market actually increased by 0.4% in the first quarter of 2010 – the first positive return in over two years, which CB Richard Ellis say is encouraging.
Recent data from the Investment Property Databank (IPD) on the UK market shows that the capital value of UK property rose 1.6% in March, equating to cumulative capital growth of more than 13% over the previous eight months. CB Richard Ellis say that despite the turnaround in performance in the UK market, strong appetite from a range of buyers and an improvement in the volume of stock being offered for sale, transaction volumes in the UK have yet to improve significantly. They say that private overseas buyers and institutions are all seeking out investment opportunities in the UK and the bulk of demand remains firmly fixed on London despite the very significant price adjustments that have taken place in recent months. Yields for prime office investments in the West End are now in the order of 4.25% while prime yields in the City of London are in the order of 5.5%, which CB Richard Ellis says means that much of the yield adjustment has already taken place which is making it difficult to find value in the London market. Their research indicates that there is currently as much as £3 billion of property assets being offered for sale in London City of which approximately 20% is being brought to the market on the instruction of banks. Some of these financial institutions are amenable to taking a stake in the properties and benefiting from any potential upside.
A number of development sites continue to be offered for sale on the instructions of receivers and liquidators. However, CB Richard Ellis say that completions are still few and far between with potential buyers limited to those prepared to invest cash funds to secure sites. A number of retail site sales are proceeding subject to planning but have not yet completed.
Following two years of very little activity in the hotel property sector, which the property consultants say is primarily due to a lack of bank funding, the sale of Chief O’Neill’s Hotel in Smithfield in Dublin 7 has now completed for between €8 million and €9 million. CB Richard Ellis says that funding for hotels remains difficult to source. However, with more banks realising that hotel sales can be achieved if they remain on board to fund the new purchasers on proper commercial terms, they expect to see a number of other hotel sales being negotiated over the course of the coming months. CB Richard Ellis says that there is genuine appetite for good hotel properties in prime locations subject to realistic valuations and the availability of funding. There are no sales transactions being completed in the pub sector at present with the focus of attention on leasing. The former Spawell premises in Templeogue have been leased in recent weeks. The property, which will trade as Darcy McGee’s, generated considerable interest due to its size and location. A letting has also been agreed recently by CB Richard Ellis on The Viper Room on Aston Quay.
CB Richard Ellis say that there has been a notable increase in activity in the Irish commercial property investment market in recent months but this has yet to translate into transactional activity. According to their research, only €19 million was transacted in the Irish market during the first three months of 2010. However, they say that there are up to €500 million of transactions being negotiated at present so they expect to see transaction volumes improve considerably in Q2 and Q3. Prime yields have firmly stabilised in all sectors of the Irish market, and the most recent data from the Investment Property Databank (IPD), confirms that total returns in the Irish market actually increased by 0.4% in the first quarter of 2010 – the first positive return in over two years, which CB Richard Ellis say is encouraging.
Recent data from the Investment Property Databank (IPD) on the UK market shows that the capital value of UK property rose 1.6% in March, equating to cumulative capital growth of more than 13% over the previous eight months. CB Richard Ellis say that despite the turnaround in performance in the UK market, strong appetite from a range of buyers and an improvement in the volume of stock being offered for sale, transaction volumes in the UK have yet to improve significantly. They say that private overseas buyers and institutions are all seeking out investment opportunities in the UK and the bulk of demand remains firmly fixed on London despite the very significant price adjustments that have taken place in recent months. Yields for prime office investments in the West End are now in the order of 4.25% while prime yields in the City of London are in the order of 5.5%, which CB Richard Ellis says means that much of the yield adjustment has already taken place which is making it difficult to find value in the London market. Their research indicates that there is currently as much as £3 billion of property assets being offered for sale in London City of which approximately 20% is being brought to the market on the instruction of banks. Some of these financial institutions are amenable to taking a stake in the properties and benefiting from any potential upside.
A number of development sites continue to be offered for sale on the instructions of receivers and liquidators. However, CB Richard Ellis say that completions are still few and far between with potential buyers limited to those prepared to invest cash funds to secure sites. A number of retail site sales are proceeding subject to planning but have not yet completed.
Following two years of very little activity in the hotel property sector, which the property consultants say is primarily due to a lack of bank funding, the sale of Chief O’Neill’s Hotel in Smithfield in Dublin 7 has now completed for between €8 million and €9 million. CB Richard Ellis says that funding for hotels remains difficult to source. However, with more banks realising that hotel sales can be achieved if they remain on board to fund the new purchasers on proper commercial terms, they expect to see a number of other hotel sales being negotiated over the course of the coming months. CB Richard Ellis says that there is genuine appetite for good hotel properties in prime locations subject to realistic valuations and the availability of funding. There are no sales transactions being completed in the pub sector at present with the focus of attention on leasing. The former Spawell premises in Templeogue have been leased in recent weeks. The property, which will trade as Darcy McGee’s, generated considerable interest due to its size and location. A letting has also been agreed recently by CB Richard Ellis on The Viper Room on Aston Quay.
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