THERE are early indications that the Irish commercial property market may be heading towards a period of stability after three years of decline.
The latest property index from agent Jones Lang LaSalle shows that while capital values and rents for all commercial property sectors continued to drop in the third quarter the pace of decline was much slower than in previous quarters during the year.
Capital values in the index fell by 1.1 per cent in the three months up to the end of September – the lowest capital value drop since the market peaked in Q3, 2007. Though still negative, the retail sector had the best capital value performance at –0.6 per cent in Q3 and –5 per cent in the nine months up to September.
Capital values for the office sector fell by 1.2 per cent in the quarter and by -9.2 per cent since January last. Industrial capital values fell by 3.1 per cent in the quarter and by 10.4 per cent in the past nine months. The study shows that overall values in the commercial market have fallen by 59 per cent since September, 2007.
Dr Clare Eriksson, head of research at Jones Lang, reported yesterday that its overall returns index showed a positive growth of 1.2 per cent in the last three months. She said the main positive for commercial property was that the slowdown in capital value declines during 2010 may indicate that “we may be reaching the bottom of the market for prime commercial property for Ireland in the next three to six months.”
John Moran, managing director of the agency, said “the current income yields available on commercial real estate, and in excess of 8.5 per cent, provide a cushion against further value decline in terms of overall performance”.
However, the performance of the Jones Lang index continued to be hindered by distressed tenants and uncertainty over their continuing ability to pay rent in the last three months. Income levels in the index have fallen by 4.4 per cent in Q3 and by the same percentage in the year to September.
After the high level of rental decline for commercial property recorded by the index in the second quarter, the report welcomed the slowdown in the pace of movement in Q3.
Rental values in the index dropped by –5 per cent in Q3 and by –19.8 per cent in the nine months to September.
As with capital values, the industrial sector had the poorest quarterly rental value performance in Q3, falling by 5.8 per cent compared to –5.4 per cent for offices and –4.3 per cent for retail.
In the nine months up to September, rental values in the index have fallen by 29.8 per cent for industrial property, –20.7 per cent for offices and –15.7 per cent for the retail sector.
