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Signs of improvement in some parts of the Irish commercial property market

 According to CB Richard Ellis’s bi-monthly report for September 2009 rental and capital values are still patchy but analysts are optimistic about the outlook over the next six months.

‘We are confident that there will be a meaningful improvement in transaction volumes in the investment and occupier sectors of the market in the third quarter,’ the report says.

However, the outlook for other sectors such as development land, hotels and the pub market remains pessimistic as they are more reliant on consumer spending.

The fact that sellers have accepted lower values has led to an increase in activity in the investment sector of the market in recent months, the report points out.

Prime property yields in the Irish investment market have been demonstrating signs of stabilisation in recent months, although there is limited transactional evidence to demonstrate this.

‘However, six of the seven AIB bank branches offered for sale during the summer are now in legal’s, with most of these properties changing hands for at or above their guide prices,’ analysts explain in the report.

Prime headline rents in the Dublin office market continue to come under pressure as landlords are eager to generate cash flow. Headline rents are now around €430 per square meter having peaked two years ago at €673 per square meter.
According to the report the overall vacancy rate in Dublin is now almost 21% whereas the vacancy rate in the core Dublin 2/4 district is somewhat lower at 14%.
With regard to the retail sector of the market, CBRE say the most recent retail sales data shows a welcome reversal of the negative trend with retail sales for June 2009 showing a 2.2% increase month-on-month.
But analysts caution against taking these small improvements as signs of a wider recovery.

‘We have definitely seen renewed transactional activity in some sectors of the Irish property market in recent months and are encouraged that transaction volumes will improve over the course of the autumn,’ said  Guy Hollis, managing director At CB Richard Ellis.

‘While rents and capital values remain under pressure, it is wrong to assume that the market is dead because the reality is that transactions are being negotiated in many sectors of the market and activity is picking up as economic projections improve,’ he added.