Irish commercial property market still challenging but confidence improving, report shows

Prime headline office quoting rents in Dublin city centre are now stabilising at around €376 per square meter while prime headline rents in the suburbs of the capital are now steady at around €215 per square meter, the latest bi-monthly report on the Irish market from CB Richard Ellis shows.
 
However, the vacancy rate in Dublin remained high at 23% and analysts said that a decline in vacancy would be particularly slow to materialise in this cycle due to the high proportion of older properties and floors of otherwise occupied buildings that are currently being marketed to let.
 
In the retail market the report says that tenants continued to negotiate rental reductions and quoting rents are now down around 30% from peak. While in the investment market it says that the recovery in property values which has started to emerge in some European property investment markets, most notably in the UK, has not yet materialised in the Irish investment market.
 
But the report says there had been a marked improvement in sentiment and investor interest in the Irish investment market since the beginning of the year. A growing trend of international investor interest in a market that has previously been dominated by local purchasers is encouraging.
 
An example is that none of the larger investment transactions that are currently being negotiated in the Irish market are being pursued by domestic investors and few were likely to be funded by domestic banks.
 
‘Like many markets across Europe, prime office rents appear to be stabilising at current levels. This is the first quarter since the third quarter of 2008 where we have not adjusted our office rental series downwards and hopefully this is indicative of a trend, for prime office properties at least, explained Marie Hunt, director of research.
 
‘In the investment sector, prime yields are now stable in all sectors with prime retail, office and industrial yields potentially trending a little stronger over the coming months. All of this is encouraging,’ she added.
 
According to Guy Hollis, managing director at CBRE, while conditions in the commercial property market for the most part remain challenging, it is encouraging that sentiment is improving.
 
‘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,’ he said.