Conditions in the Irish commercial property market have continued to deteriorate because of its weakening national economy and the global financial crisis, according to CB Richard Ellis.

The global property services company said in a market update today that the lack of bank funding was significantly impacting activity in the development and investment sectors with only €465m (£370m) of investment deals taking place in the first nine months of the year compared to €1.6bn (£1.2bn) in the same period last year.

Ireland in recession

It follows the news this week that Ireland was officially in recession following two consecutive quarters of negative growth and the announcement yesterday that the Irish government had moved to protect six Irish banks guaranteeing all deposits for the next two years.

CBRE said many occupiers are postponing expansion plans or relocation decisions because of the weaker economy but some deals were still happening ‘with some occupiers finding it an opportune time to be concluding lease negotiations, considering the relative value on offer in the current climate’.

It said that landlords are beginning to accept slightly lower headline quoting rents in addition to other inducements such as rent-free periods and break options to secure lettings.

'Very challenging'

Guy Hollis, managing director at CBRE in Ireland, said: ‘Conditions in the Irish commercial property market remain very challenging. The ongoing financial market crisis and lack of liquidity in the banking system has essentially made many sectors of the property market illiquid and this makes the accurate assessment of property values very difficult.’

CBRE said that at a time that the Irish government’s finances continue to deteriorate it should reduce the rate of stamp duty on commercial property which would encourage some non-domestic buyers to consider purchasing property assets here.

Barriers to entry
Marie Hunt, director of research at CBRE, said: ‘Sovereign wealth funds and international investors continue to seek out investment properties across Europe. However, despite the price correction that has occurred in the Irish market since the beginning of the year, the exorbitant 9% rate of stamp duty prevailing here is likely to prove a considerable barrier to such investors. This issue urgently needs to be addressed by Government in the forthcoming Budget.’

Outside of Ireland CBRE said Irish investors had also carried out very few deals in the UK were estimated to only invest around €1bn (£800m) in the UK this which was less than one fifth of the total spent in the UK by Irish investors last year.