AN INDEPENDENT survey of commercial property experts has forecast that the market should recover towards the end of 2009 or early in 2010.
The study was carried out in July before the intensification of the turmoil in the financial markets and the bail-out of the banks.
The seventh annual survey of business sentiment in the commercial property market was commissioned by the Bank of Scotland (Ireland) and carried out by the Society of Chartered Surveyors and the Dublin Institute of Technology.
It found that 46 per cent of the respondents expect the market to stage a recovery in 2009, probably towards the end of the year. Another 40 per cent of the chartered surveyors felt that there would be no improvement until 2010, most likely in the first six months. Another 12 per cent of those questioned expect the slowdown to be more prolonged, lasting until 2011. No one taking part in the survey felt that the current setback could continue beyond 2011.
Not surprisingly, the survey forecasts that when the recovery gets under way it will be triggered by greater confidence in the economy and easier access to bank funding. Other factors that could help include lower interest rates, an improved global economic climate and a drop in inflation, unemployment and oil prices.
Overall sentiment has fallen by 73 index points in a period of 20 months. Last November the index stood at 56.5 but by July it had slipped to 26.6.
Declan O’Hanlon, head of property banking at Bank of Scotland (Ireland), said it was not surprising that sentiment in the marketplace had fallen for a second period as the economic and financial turmoil continues.
The survey was carried out before the momentous events of recent weeks so he expected it to take longer for the market to recover, probably at some stage in 2010.
He said they hoped that the changes in commercial property stamp duty announced in the Budget would encourage “activity and optimism”.
Most chartered surveyors questioned last July expected values to fall by over 10 per cent. The reality now is that values have fallen by at least 25 to 30 per cent and are expected to slip further in the coming months.
Likewise, the survey said that rents will fall further to be accompanied by rent-free periods, break clauses and shorter leases as inducements to incoming tenants. Rental income is regarded as the main rationale for investment, with three-quarters of respondents regarding it as more important than capital appreciation for investors. This is a complete reversal of the overall view expressed last November.
The study also showed that sentiment about activity levels has fallen sharply this year.
Between 67 and 90 per cent of respondents forecast that there would be a fall off in transactions across the three sectors of the market while between 50 and 73 per cent expect inquiries also to slip.
Sean McCormack, president of the Society of Chartered Surveyors, said the wave of negative sentiment apparent from the survey results and its impact on falling commercial property values was now a market reality. He expected that the changes in the stamp duty would encourage activity and optimism.
