1st July 2010 | The Dublin office of CB Richard Ellis Group (“CBRE”), the international commercial real estate firm, today launched their latest bi-monthly assessment of conditions in the Irish commercial property market. The July 2010 report confirms that many sectors of the Irish commercial property market are now showing signs of improvement, following the biggest downturn ever experienced in the property market.

Report Highlights

► Improving levels of activity in the Dublin office market, with a number of lettings being negotiated and a growing number of requirements for accommodation being activated

► Prime office rents stabilising but retail and industrial rents continuing to come under downward pressure

► Yields for prime high street retail investments have improved quarter-on-quarter from 6.5% to 6.25%

► Approximately €100 million was invested in the Irish property investment market in the first half of 2010 – more than twice the level of investment in the whole year in 2009

► Irish investors net sellers of real estate in the UK where the strong rally of the last 10 months is showing some signs of easing

Marie Hunt, Director of Research at CB Richard Ellis who compiled the report said, “Although the decline in property values in the most recent cycle was more severe than ever experienced in any other previous cycle (primarily as it was caused by an unforeseen liquidity crisis and the withdrawal of foreign credit to Irish banks), we have to remember that this is a ‘cycle’ and based on what we are now seeing on the ground in the Irish commercial property market, it is one which we are slowly starting to emerge from”.

According to the new report, there has been an encouraging improvement in activity in the Dublin office market in recent months. In fact, when data has been compiled, take-up in the Irish capital over the last three months is likely to be higher than the almost 25,000m2 of lettings agreed in the city in Q1 2010. CB Richard Ellis say that prime rents in Dublin city centre are holding steady at approximately €376 per square metre or €35 per square foot although the agents say that downward pressures remain for secondary accommodation, particularly around the M50 where there is a large concentration of vacant accommodation. Despite a significant decline in the number of new schemes coming on stream, CB Richard Ellis say that the existing overhang of office space will be slow to erode until more net absorption is achieved.

Guy Hollis, Managing Director at CB Richard Ellis said, “In the same way that international investors are focused on finding prime investment opportunities in Ireland, in the occupier markets, we are seeing demand from a range of international occupiers to locate in the Irish market. This is primarily fuelled by the attractive rate of corporation tax prevailing here but has also been helped in recent months by the fact that rents and wage costs have declined significantly and enhanced our competitiveness. The fact that the unemployment rate is relatively high at 12.9% is also viewed as a positive by many potential occupiers on the basis that there is a greater labour pool available than was previously the case.”

CB Richard Ellis says that the ability to make quick decisions can make the difference between potential tenants choosing one office building over another in the current climate. Occupiers remain extremely cost-conscious; are focussed on turnkey solutions and are showing a preference for fully fitted accommodation. In addition, occupiers are focussing attention on the all-in costs of occupation, including service charges and rates as opposed to just rents, with finance directors having significantly more input into the decision-making process than heretofore.

With regard to the retail sector, the property consultants say that there has been a modest improvement in underlying consumer spending trends in recent months, fuelled by the emergence of more positive economic forecasts and the recent spate of good weather. At this juncture, with the summer sales season in full swing, CB Richard Ellis say that retailers are more upbeat than they were only six months ago but caution that the next six months will continue to be challenging and getting transactions across the line is likely to remain difficult. Prime rental values in the retail sector continue to come under downward pressure.

Certain occupiers in the industrial market are willing to compromise on building quality and in some cases efficiency in order to cut costs according to CB Richard Ellis who say that almost all of the transactions being concluded in this sector of the market at present comprise short-term lettings. Industrial occupiers are purely focused on cutting costs and as a result, rental values remain under pressure in this sector with a clear gap emerging between rents for modern/new premises and older second-hand accommodation.

According to the report, activity in the Irish investment market continues to improve with domestic and overseas investors looking for prime investment opportunities. CB Richard Ellis says that approximately €100 million was transacted in the Irish investment market during the first six months of 2010, which is higher than the level of spend in the whole year in 2009. However, according to the property consultants, there is a dearth of prime properties being offered for sale. Although prime yields continue to fall in most European markets, prime yields in the Irish property market remain stable at current levels with the exception of prime high street yields, which CB Richard Ellis have recently adjusted downwards by 25 basis points to 6.25%. CB Richard Ellis say that few new investment properties are likely to be offered for sale until the autumn and it remains to be seen if NAMA will offload any investment product later in the year once they have reviewed the business plans of the Top 10 borrowers.

According to the new report, the last few weeks have marked a clear watershed for the UK investment market. While the attraction of the asset class remains compelling for potential investors, returns in April and May were more sedate than experienced since the UK investment market first began to recover 12 months ago.

A lot of investment properties have come to the market in recent months, particuarly in Central London, and as returns stabilise, there is a definite sense according to CB Richard Ellis that the strong demand that has been driving the rally in the UK market over the last 10 months is now beginning to ease somewhat.

Prime yields in all sectors in the UK are now stable at current levels. However, CB Richard Ellis says that the UK economy remains fragile, rental growth remains largely confined to the London market and it remains to be seen what impact austerity measures to be implemented by the new coalition Government will ultimately have for the property sector. Against this backdrop, Irish investors are taking advantage of the strong pricing in the UK market and in an effort to recover some or all of their equity have been net sellers of UK real estate in recent months.

Referring to many of the recent fire sales that have been taking place in the residential property market, the property consultants say that the establishment of pricing benchmarks will assist in the accurate valuation of land. They say that there is some appetite from domestic and overseas companies to do joint ventures on land but most lending institutions and developers are not yet in a position to pursue this option. CB Richard Ellis does not expect to see many new sites coming to the market until autumn. They say that even though NAMA are now in the process of reviewing the business plans of the Top 10 developers, they do not expect to see the state entity making decisions on land sales until later in the year at the earliest. The property consultants don’t expect to see many new hotels being offered for sale for the foreseeable future either with most operators, financial institutions and advisers opting to put management contracts in place as opposed to selling in the short to medium term.


Marie Hunt
Director of Research
Tel:+353 1 618 5543
Mobile:+353 87 2727115

Guy Hollis
Managing Director
Tel:+353 1 618 5560

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 29,000 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. CB Richard Ellis has been named a BusinessWeek 50 “best in class” company for three years in a row. 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 100 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