Ireland outperforms UK commercial property in Q2 2012

Ireland outperforms UK commercial property in Q2 2012

Total return in Ireland, now positive for the third consecutive quarter at 0.6%, outdid the 0.3% delivered by the UK commercial property sector in the three months to June, according to the IPD UK Monthly Property Index.

Nevertheless, and despite growing international investor attention, which saw some of the largest transactions in Dublin for the last four years, Irish real estate values continued to decline in Q2, by a further -1.8% and have now fallen by a cumulative 66% since September 2007.

The Alliance Building in Dublin was one of the properties that helped Ireland outperform the UK commercial property market in Q2 2012

The unprecedented falls have made Irish property some of the most discounted in the world, and mean that income returns in Ireland are hard to beat, at over 10% on annual basis, though only if sustainable tenants can be found – and it is this income return that is making Irish property again competitive. 
Rental value falls have also continued to see a relative stabilisation, falling by only 1.1% in Q2 – after having declined by over 47% between September 08 and March 2012, according to the SCSI/IPD Ireland Quarterly Property Index.

Phil Tily, IPD managing director for the UK and Ireland, explained: “There have been a number of big name international lettings, particularly in the Dublin retail and office sectors, but the impacts of austerity cuts and the wider Eurozone crisis are still limiting occupier demand, which continues to push down values.

“The same external drivers are leading to guarded valuer sentiment. Yield expansion was minimal, but continues to have a negative impact on market values.

“In relation to property performance in the UK, it’s more reflective of the UK market really suffering, rather than any outstanding performance in Ireland.”

Roland O’Connell, president of the Society of Chartered Surveyors Ireland, continued, “Investor confidence, availability of finance and availability of the right type of product are still the main issues in the market. An increase in sales during 2012, including such properties as the Alliance Building and Riverside II, demonstrated that there are buyers for better quality buildings, and that investor confidence is improving, though availability of finance will remain a brake on the market for the immediate future.

“Though the Irish market remains over supplied in all sectors, there are distinct signs that we will shortly face a shortage of large prime city centre offices in Dublin, while we will continue to have an oversupply of secondary product. Consequently the gap between demand and rents for the best prime property and secondary product could widen further.”

The SCSI / IPD Ireland Quarterly Property Index is based on a sample of 294 properties covering €2bn at the end of June 2012.

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