Unusual Dynamic In The Irish Commercial Property Market

Occupier Markets Performing Well Although Investment Sector Remains Weak

Dublin, 1st May 2011 – Property consultants CB Richard Ellis today released their May bi-monthly report, which indicates that there are significant variations in the performance of the various sectors of the commercial property market in Ireland at present.

A full PDF copy of the May 2011 Bi-Monthly Research Report is available to download at the PDF link bellow.

Encouraging levels of activity continue to be recorded in the occupier sectors of the commercial property market in Ireland and the number of properties being brought to the market has increased in recent months. However, despite the fact that property values are now showing signs of stabilising, activity in the investment sector of the Irish market remains disappointingly weak, with potential investors holding off making investment decisions, primarily as a result of the uncertainty prevailing regarding Government proposals to retrospectively review rent clauses in all business leases.

Key Highlights
 In the Dublin office sector, take-up has been strong over recent months. A number of significant office letting transactions are currently in legals and are due to sign over the coming months, suggesting that take-up will remain strong in forthcoming quarters despite the underlying economic situation. There are also a number of large requirements which have yet to be fulfilled, which is encouraging although with lease negotiations proving very protracted at present, many of these office lettings may not have signed by year-end.

 The development pipeline in the office sector has now firmly come to a halt with no new office schemes under construction at present in the Irish capital.

 Recent research from CB Richard Ellis shows that 26% of international retailers now have a presence in the Irish market, up from 25% last year, making Ireland the 32nd most international retail market in the world. This leaves room for many more new entrants to set up operations in Ireland. This will be facilitated by the attractive terms and conditions now on offer in the Irish retail market.

 A solution urgently needs to be put in place to provide legislative support to retail tenants in genuine need. However, implementing a solution that will enable all business tenants’ review their rent instead of those who genuinely need assistance will cause further unnecessary damage to Ireland’s international reputation and add further financial burden on the already beleaguered taxpayer. The Government needs to clarify their intentions on this issue as soon as possible.

 There has been a healthy level of activity in the industrial sector of the commercial property market in recent months although for the most part, conditions remain challenging and most transactions are short-term in nature. Almost 40,000m2 of industrial take-up occurred in Dublin in the first three months of 2011 – a 28% increase on the previous quarter. However, this was influenced by a small number of larger transactions which buoyed the results to some extent.

 In the investment sector, the most recent results from the Investment Property Databank (IPD) show that income return from Irish property in Q1 2011 was eroded by some further slippage in capital values in the period, with a total return of 0% achieved. However, it is encouraging that the pace of depreciation is clearly slowing.

 The Irish investment market is in stalemate at present, primarily as a result of the uncertainty prevailing regarding Government proposals to retrospectively review rent clauses in all business leases. Until such time as Government outline their specific intentions in this regard, investors will continue to hold off making large-scale investment decisions.

 The UK investment market has been trending weaker in recent months. There is still a weight of capital chasing UK property assets, particularly in Central London but London property now appears fully priced and some international investors are beginning to see better value in other markets such as Germany and Central and Eastern Europe. There has been a lack of good quality investment properties coming to the market in recent months. Irish investors remain net sellers of UK properties.

 Transaction volumes have remained weak in the development land market in recent months although a number of sites are now beginning to be brought to the market, which should result in some sales activity being recorded over the course of the Summer. The recent Allsops auction of distressed property demonstrates that buyers are willing to engage if pricing is realistic.

 There have been two development sites sold to cash purchasers in Belfast in recent weeks, a 1.5 acre site on Boucher Road in Belfast and the site of the former Nambarrie Tea Factory at Victoria Street, which extended to approximately 0.15 acres. This property was sold for a price in the region of £1.2 million. Land prices in the region appear to have now reached a stage where purchasers are willing to engage.

 There appears to be increase in banks appointing receivers to pub properties in recent months. Two Dublin pubs, Scholars on Clanbrassil Street and Hobblers Inn/Raytown Bar in Ringsend have recently been brought to the market.

Commenting on the launch of the May bi-monthly report, Marie Hunt, Director of Research at CB Richard Ellis said “With NAMA’s influence on the market becoming increasingly evident, the dynamic of the Irish commercial property sector is unusual at the present time. The office, retail and industrial occupier markets in Dublin continue to perform well, as a result of occupiers taking advantage of current market conditions. There is also genuine demand for smaller lot size properties that are brought to the market quoting realistic prices. However, activity in the investment sector of the Irish commercial market for the most part remains very weak and this situation is unlikely to change until such time as the Government provides some clarity regarding their proposals on rent reviews.”


CONTACT: Marie Hunt – 00 353 1 6185543 / 00 353 87 2727115 or marie.hunt@cbre.com

About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com

In Ireland, with offices in Dublin and Belfast, CB Richard Ellis is the country’s largest commercial real estate services company, now employing over 140 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, project management, consultancy, valuations and research. CB Richard Ellis Ireland has been listed among the Best Workplaces in Ireland, 2011, for the seventh year running. Please visit our website at www.cbre.ie or www.cbre.ie/ni

CBRE ' Bi-Monthly Research Report May 2011
CBRE ' Bi-Monthly Research Report May 2011