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Irish commercial property market stabilising after hard downturn

The latest report from CB Richard Ellis indicates that there has been a ‘meaningful’ improvement in transaction volumes in both the investment and occupational sectors and sentiment has started to improve.
 
It predicts that the first three months of 2009 was the lowest point that the office sector reached and since then there has been improved activity with a large number of small lettings, albeit at much reduced terms and conditions compared with the peak of the market in 2007.

Analysts at CBRE said that investment yields for prime properties in the Irish market have started to show signs of stabilisation and demand from overseas investors is particularly strong with UK property companies and German funds as well as private investors looking for prime income producing assets.
 
However, it said there were limited prime properties available and it is likely to be the first half of 2010 at least before there is any momentum in terms of transactional activity.

It also reports that the overall vacancy rate in the Dublin office market continues to edge upwards having now reached almost 22% while the vacancy rate in the city centre is around 14%.

CBRE said landlords in the Dublin market are increasingly being asked to grant substantial rental discounts to retain tenants in their buildings.
 
‘We are encouraged to see at least some transactional activity returning to the Irish market but there is clearly a long way to go.

Yields show signs of stabilising but until liquidity starts to return to the economy as a whole it will be sometime before we can expect to see a meaningful increase in volumes,’ said Guy Hollis, managing director CBRE.

‘We expect to see investment volumes increase from the very low base reached in 2009 as we move into 2010 but opportunities remain scarce,’ he added.

Overall prime rents have fallen up to 40% from peak and while the pace of rental decline has slowed further pressure still remains especially for secondary properties.

No office investment transactions were completed in the third quarter, the report shows, but it says it is encouraging that €29.4 million of transactions in the retail sector were completed.

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