Irish commercial property returns rose to 2.3pc in Q2, their highest in almost six years, as capital values stabilised and the nascent Irish recovery gathered momentum.
Property values, which have fallen by over 65pc for 21 consecutive quarters, finally saw a degree of stabilisation, falling by just 0.01pc, according to the IPD/SCSI Ireland Quarterly Property Index.
Ireland’s commercial property assets, which have seen the largest declines of any market measured globally by IPD, are responding to growing demand from international and domestic investors. The last 12 months have seen successful sales from distressed bank loan books, increasing interest from a swarm of private equity buyers and the first successful launch and capital raising of an Irish REIT. All of this has been translated into improving property market performance and sentiment.
However, this interest has focused almost exclusively on central Dublin offices and it is this improvement that is driving the overall market turnaround.
Office values rose by 1.2pc overall in Q2, but in Dublin’s Docklands this increased to 5pc, and in central Dublin (excluding the Docklands) 0.6pc. Outside of the capital, values continued to decline.
Improvements in the lettings market have been instrumental in driving this growth.
Rents for central Dublin offices grew by 0.3pc, and in the Dockland’s by 1pc. This has given investors the confidence to return to Dublin’s offices, where income returns are in excess of 10.3pc provided tenants can be secured.
But outside of the Dublin office sector the recovery still seems a distant prospect. In the beleaguered retail market, which returned 0.5pc in Q2, values fell by a further -1.5pc, and even the prime shopping streets of Dublin continued to see further write downs in value. Source: Irish Independent