ONLY TWO IRISH PROPERTY INVESTMENT TRANSACTIONS COMPLETED IN THE LAST THREE MONTHS
Thursday March 31st 2011 – Property consultants CB Richard Ellis today confirmed that there were only two investment transactions completed in the Irish property market in the first quarter of 2011, a factor they directly attribute to plans by the new Government to retrospectively review rent provisions in existing business leases. The property consultants earlier this year warned that a lack of clarity about these Government proposals would hamper investment activity in the Irish market – this prediction has now been borne out by the fact that only two investment transactions were signed in Ireland during Q1 2011 – the sale to Google of their premises Gasworks House and Gordon House at Barrow Street in Dublin 4 and the sale of an office building occupied by Ericsson in Clonskeagh.
This follows a year in which 29 transactions with a combined value of almost €242 million were completed in the Irish market, with approximately 30% of this value being attributed to non-Irish buyers.
CB Richard Ellis say that from a legal perspective the implementation of a retrospective review of rent provisions in existing lease contracts will prove a huge constitutional challenge. The property consultants predict a long period of uncertainty until this issue is taken to the Supreme Court which they say will have huge consequences. Indeed, CB Richard Ellis says that investment activity will remain constrained until such time as the new administration confirms their intentions in this area.
According to Sean O’Brien, Investment Director CB Richard Ellis, Ireland, “Commercial rents did become too high during the boom and in the current environment need to be adjusted to restore competitiveness and sustainability. This process is already actually underway as leases expire and new rents are negotiated between landlords and tenants. However, the proposal as it stands, to impose a downward rent adjustment in all business leases will cause more problems than it will solve. It is likely that landlords will ultimately have to be compensated by the State for the drop in rental income and value of the property. This could amount to billions of Euro, putting further pressure on the taxpayer and State finances.
The bottom line is that Ireland needs overseas capital to invest here. The uncertainty created by the Government proposal, as well as the fear that the State could unilaterally change existing contracts at any time, is quite obviously deterring badly needed investment. The uncertainty that has prevailed in the investment market regarding this issue has effectively stalled considerable international appetite for prime investment opportunities in the Irish market at a time when domestic investors are few and far between and the market is largely reliant on international investors. It is very concerning that there were only two investment transactions signed in the last three month period. We urge the Government to address this issue immediately because otherwise in addition to stalling investment activity, there is potential to further erode commercial property values, which have already fallen by more than 60% from peak”.
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 2009 revenue). The Company has approximately 30,000 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 website 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 top 50 Best Workplaces in Ireland, 2010, for the sixth year running. Please visit our website at www.cbre.ie or www.cbre.ie/ni