Some stabilisation emerging in the Irish commercial property market

With attention still firmly focussed on transferring land and development loans over to the NAMA vehicle, transactions in the development land market remain few and far between according to CBRE. The property consultants believe that the 300,000 figure which has been discussed in recent weeks with regard to vacant unsold housing around the country overstates the quantum of vacancy and that the true figure is closer to the Department of Environment estimate of approximately 120,000 units.

An issue that is causing huge concern in the development sector at the moment according to the report is the Government proposal to increase the rate of capital gains tax to 80% for disposals of land that have been rezoned for alternative uses, which is due to be enacted in the forthcoming Finance Act. CB Richard Ellis says that this will have huge value implications for the development land sector and will compromise brownfield development. The property consultants strongly advocate that the increased tax rate be limited to zonings of previously unzoned land as they say that this will prove a more workable solution.

With everyone waiting for NAMA to get up and running, there have been very few hotels brought to market in recent months. However, that is about to change with the launch of marketing campaigns for the Ostan na Rosann in Donegal and the Kenmare Manor hotel in Kerry. Outside of Ireland, the London hotel market continues to buck the trend and remains very strong with a number of significant sales concluded in recent months. CB Richard Ellis Hotels recently won the mandate to bring the prestigious 5-star Grosvenor House Hotel in London, which is operated by Marriott, to the market. This is a real ‘trophy’ asset which has already attracted huge international interest, with some reports suggesting it could command in the region of €600 million to £700 million. According to the March bi-monthly report from CB Richard Ellis, there might be some good news for the Dublin pub market shortly with CBRE agreeing a deal on The Globe/RiRa premises in Dublin city centre.

Conditions in the Northern Ireland property market are also covered in the new report. While activity is continuing in various sectors of the property market in the region, CB Richard Ellis say that the big unknowns at this juncture include what is likely to happen in the forthcoming general election and what the possible knock-on effect of cost-cutting in the public sector will be. Pressure groups have again raised the question in recent weeks about reducing the rate of corporation tax in the region. CB Richard Ellis says that this would clearly give a massive boost to the Northern Ireland economy and in turn the property market in the region, particularly considering the competitive rents and labour costs relative to the Republic. Prime yields in the Northern Ireland market remain stable although transactional activity remains limited to very small lot sizes in provincial towns in the region. Much attention will be focussed on NAMA over the coming months, with the due diligence process now firmly underway for the loans on Northern Ireland properties that are ultimately due to move over to the entity.

Guy Hollis, Managing Director at CB Richard Ellis said, “While conditions in the commercial property market for the most part remain challenging, it is encouraging that sentiment is improving now that rents in many sectors are showing signs of stabilising and that prime yields in the investment sector are stable with the potential to trend stronger over the coming months. While it is still early in the year, there has been a notable increase in activity in the last few months, which we believe will translate into higher volumes of transactional activity in the property sector in 2010”.