01. März 2010 
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Some stabilisation emerging in the Irish commercial property market
Property consultants CB Richard Ellis today launched their latest bi-monthly assessment of conditions in the Irish commercial property market. The March 2010 update states that while conditions remain challenging in the property market, there are some encouraging signs of stabilisation emerging both in terms of rents and yields.
According to Marie Hunt, Director of Research at CB Richard Ellis, “Like many markets across Europe, prime office rents appear to be stabilising at current levels. This is the first quarter since Q3 2008 where we have not adjusted our office rental series downwards and hopefully this is indicative of a trend, for prime office properties at least. In the investment sector, prime yields are now stable in all sectors with prime retail, office and industrial yields potentially trending a little stronger over the coming months. All of this is encouraging”.
According to the report, prime headline office quoting rents in Dublin city centre are now stablising at approximately €376 per square metre while prime headline rents in the suburbs of the capital are now stabilising at approximately €215 per square metre. CB Richard Ellis say that considering the competive terms and conditions on offer, office leasing activity is continuing on a steady basis despite the economic backdrop. However, the property consultants say that with the vacancy rate in Dublin remaining high at approximately 23%, continued inward investment and significant indigenous requirements will be required to absorb the current overhang of office accommodation. They say that a decline in vacancy will be particularly slow to materialise in this cycle due to the high proportion of older properties and floors of otherwise occupied buildings that are currently being marketed to let. Proactive landlords continue to approach tenants regarding restucturing their existing leases. This trend includes negotiating the removal of break options or extending the length of the existing lease in return for rental reductions.
Many retail tenants are also being proactive in the current climate and looking at restructuring their lease commitments. According to CB Richard Ellis, in many cases, tenants are negotiating rental reductions. They say that it is difficult to determine rental values although they believe that prime headline quoting rents are down approximately 30% from peak.
With regard to the industrial sector, CB Richard Ellis say that there is some momentum in terms of letting activity but that the market continues to perform below trend and is likely to do so until economic conditions improve and job creation re-emerges.
The new report says that the recovery in property values which is starting to emerge in some European property investment markets and most notably in the UK has not yet materialised in the Irish investment market. However, CB Richard Ellis says that there has been a marked improvement in sentiment and investor interest in the Irish investment market since the beginning of 2010. The property consultants point towards the growing trend of international investor interest in a market that has heretofore been dominated by local purchasers. They say that none of the larger investment transactions that are currently being negotiated in the Irish market are being pursued by domestic investors and few are likely to be funded by domestic banks.
CB Richard Ellis is unsurprisingly upbeat about the UK market. They say that interest in the UK investment property market has continued to improve in recent months, with retail funds, (who have witnessed major inflows in the last two quarters) and overseas investors leading the charge for prime office and retail properties, particularly in Central London. Values in the UK stabilised in August 2009 and have appreciated in most sectors since then, driven to a large extent by the weight of equity chasing a limited volume of prime investment product and buoyed by the weakness of sterling. The recovery in the investment market has been supported by the fact that conditions at the prime end of the occupier markets in the UK are now also showing some signs of improvement with encouraging rental growth forecasts for Central London now starting to emerge say CB Richard Ellis. They say that there has been a notable improvement in the volume of stock being offered for sale in the UK since the beginning of 2010 with a number of opportunistic sellers taking advantage of the strength of demand for investment opportunities. Interestingly, according to the new report, a number of those selling properties in the UK at present are trading assets they purchased only 12 or 18 months ago. The UK investment market has certainly been one of the first markets internationally to witness a correction and return prospects now look very encouraging. However, CB Richard Ellis say that it remains to be seen if this momentum can be maintained against a backdrop of an economy that remains weak and with a general election looming later this year.
According to Marie Hunt, Director of Research at CB Richard Ellis, “Like many markets across Europe, prime office rents appear to be stabilising at current levels. This is the first quarter since Q3 2008 where we have not adjusted our office rental series downwards and hopefully this is indicative of a trend, for prime office properties at least. In the investment sector, prime yields are now stable in all sectors with prime retail, office and industrial yields potentially trending a little stronger over the coming months. All of this is encouraging”.
According to the report, prime headline office quoting rents in Dublin city centre are now stablising at approximately €376 per square metre while prime headline rents in the suburbs of the capital are now stabilising at approximately €215 per square metre. CB Richard Ellis say that considering the competive terms and conditions on offer, office leasing activity is continuing on a steady basis despite the economic backdrop. However, the property consultants say that with the vacancy rate in Dublin remaining high at approximately 23%, continued inward investment and significant indigenous requirements will be required to absorb the current overhang of office accommodation. They say that a decline in vacancy will be particularly slow to materialise in this cycle due to the high proportion of older properties and floors of otherwise occupied buildings that are currently being marketed to let. Proactive landlords continue to approach tenants regarding restucturing their existing leases. This trend includes negotiating the removal of break options or extending the length of the existing lease in return for rental reductions.
Many retail tenants are also being proactive in the current climate and looking at restructuring their lease commitments. According to CB Richard Ellis, in many cases, tenants are negotiating rental reductions. They say that it is difficult to determine rental values although they believe that prime headline quoting rents are down approximately 30% from peak.
With regard to the industrial sector, CB Richard Ellis say that there is some momentum in terms of letting activity but that the market continues to perform below trend and is likely to do so until economic conditions improve and job creation re-emerges.
The new report says that the recovery in property values which is starting to emerge in some European property investment markets and most notably in the UK has not yet materialised in the Irish investment market. However, CB Richard Ellis says that there has been a marked improvement in sentiment and investor interest in the Irish investment market since the beginning of 2010. The property consultants point towards the growing trend of international investor interest in a market that has heretofore been dominated by local purchasers. They say that none of the larger investment transactions that are currently being negotiated in the Irish market are being pursued by domestic investors and few are likely to be funded by domestic banks.
CB Richard Ellis is unsurprisingly upbeat about the UK market. They say that interest in the UK investment property market has continued to improve in recent months, with retail funds, (who have witnessed major inflows in the last two quarters) and overseas investors leading the charge for prime office and retail properties, particularly in Central London. Values in the UK stabilised in August 2009 and have appreciated in most sectors since then, driven to a large extent by the weight of equity chasing a limited volume of prime investment product and buoyed by the weakness of sterling. The recovery in the investment market has been supported by the fact that conditions at the prime end of the occupier markets in the UK are now also showing some signs of improvement with encouraging rental growth forecasts for Central London now starting to emerge say CB Richard Ellis. They say that there has been a notable improvement in the volume of stock being offered for sale in the UK since the beginning of 2010 with a number of opportunistic sellers taking advantage of the strength of demand for investment opportunities. Interestingly, according to the new report, a number of those selling properties in the UK at present are trading assets they purchased only 12 or 18 months ago. The UK investment market has certainly been one of the first markets internationally to witness a correction and return prospects now look very encouraging. However, CB Richard Ellis say that it remains to be seen if this momentum can be maintained against a backdrop of an economy that remains weak and with a general election looming later this year.
Fotos: CB Richard Ellis
