Market Trends: The office sector of the commercial property market showed the strongest capital gain in the first quarter of this year, overtaking the retail sector for the first time since Q1 2001, according to the Jones Lang LaSalle Irish Property Index.

The capital value of offices rose by 4.4 per cent during the quarter, compared to growth of 3.9 per cent in the retail sector. In the 12 months to the end of March, however, retail capital grew by 15 per cent compared to office growth of 4.2 per cent.

Overall returns for the property portfolio in the first quarter were 5.3 per cent, bringing the total returns for the portfolio in the year to the end of March to 13.6 per cent, the index showed.

"The rise in values was predominantly led by capital growth," said Dr Clare Eriksson, head of research at Jones Lang LaSalle in Dublin.

"It is a measure of the growth in the market that overall returns in the index for the first quarter were 4 per cent higher than the Q1 2004 performance."

Capital values rose by 8.1 per cent in the year to March 2005, with the quarter showing an overall capital value increase of 4 per cent. As well as rises in office and retail capital values, the capital values of industrial property also recorded a healthy growth of 2.2 per cent in the quarter and 6.9 per cent in the year to March 2005.

Overall rental values performed less well than capital values with an increase of 2.1 per cent in the year to Q1 2005 and a marginal growth of 0.5 per cent in the quarter.

Retail rental values rose by 2.1 per cent in Q1 2005 while office and industrial rental values remained unchanged.

In the year to March 2005, retail rental values increased by 10.2 per cent, industrial rental values rose marginally by 0.7 per cent but office rents in the index dropped by -1 per cent.

Income in the portfolio recorded positive growth in Q1 2005 of 1.2 per cent and rent reviews during the year have resulted in an increase in income of 3 per cent in the year to March 2005.