Irish commercial property market weakening, says report

In its latest monthly report it said the declining trend was continuing primarily on the back of a scarcity of funding and the tightening of finance.

It said: ‘In particular, there has been a very significant decline in transactional activity in the investment and development sectors of the market in recent months. Land values have declined by as much as 20% and despite little transactional evidence CB Richard Ellis has continued to re-adjust yields in the Irish investment market in light of weakening sentiment in this sector. Transactional activity in the hotels market and Dublin pub sector has also suffered from a scarcity of bank funding in recent months.’

CBRE also said that while occupational activity in the office, retail and industrial sectors of the Irish market remained strong in the first quarter of the year it was ‘inevitable that some occupiers will put their expansion and re-location plans on hold as economic conditions worsen over the coming months’.

Scale back

In the office market sentiment was weakening and some occupiers will begin to scale back staffing needs and freeze office searches. While in the retail sector it said with consumers reining in spending the inevitable knock-on impact would be that developers will have to consider phasing plans and start dates. It said some retail schemes may ultimately be put on hold as will some industrial schemes.

On the investment side prime yields for high street retail properties were stable at 2.75% but office and shopping centre yields were moving out to around 4.25% on average. Prime industrial yields are around 5.25%.

‘There are unlikely to be many distressed sales but that some investment properties may come to the market over the coming months as geared investors strive to re-structure their borrowing commitments,’ it said.

Marie Hunt, director of research at CB Richard Ellis, prepared the report.