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Commercial property shows stability sign

Thursday, November 01 10:23:19

There has been a rise in activity in the embattled Irish commercial property sector over the last few months with signs of stabilisation starting to emerge, according to consultants CBRE today.

Total returns in the Irish commercial property market have been positive for four consecutive quarters now, according to latest figures, having increased by 4.8pc in the last 12 month period.

"There has been much discussion about a stabilisation in the Irish housing market over the last few months. This trend is also being witnessed in the commercial property sector. Indeed, the last two months have seen a very significant increase in the volume of activity in all sectors of the Irish commercial property market. Transactional activity in all sectors has escalated over the course of the Autumn. If this continues, a busy 2013 is in prospect," said Marie Hunt, Executive Director and Head of Research at CBRE.

There has been a notable increase in the volume of investment properties being offered for sale during the traditional Autumn selling season, with a number of large lot sizes coming available for sale and attracting significant attention during September and October, she said.

In addition to the E271 million of commercial investments transacted in the Irish market during the first nine months of 2012, there is currently more than E700 million of investment property being formally marketed for sale or under offer.

Some non-distressed assets are now being brought to the market, which suggests that property owners perceive this as a good time to sell considering the weight of capital chasing opportunities at present.

Demand for prime office and retail properties is primarily emanating from overseas investors. Meanwhile, many of the smaller lot sizes, which are being offered for sale around the country, are mainly of interest to domestic purchasers, particularly those with cash.

The volume of investment spend in the UK market during Q3 2012, at £11.9 billion, was up 40pc on the previous quarter, proving that investors continue to seek out investment opportunities, particularly in the London market. Indeed, 73pc of all investment transactions completed in the UK in the first 9 months of 2012 were London properties.

Although Irish investors continue to dispose of assets in the UK market, many of the more high-profile trophy investment purchases of Irish investors have been traded over the last few years.

Prime office rents have remained stable for three consecutive quarters now with some rental growth now anticipated in this sector during the first half of 2013.

An increasing number of retailers are reporting a stabilisation in their trading patterns and some are reporting year-on-year increases in trade, which is encouraging, CBRE said.

In the retail sector, demand is strongest for units on prime high streets and in good shopping centres, which is evident from the negligible void rates in these locations, albeit many of the transactions are short-term in nature and off significantly lower rents than prevailed previously.