A NEW STUDY of the Irish commercial property market has confirmed that capital values are still falling as a result of the ongoing recession and, more particularly, because of the Government’s planned intervention in future rent reviews.
The London researcher IPD reported yesterday that capital values fell by another 4.6 per cent in Q3 (quarter three), bringing the overall decline to 64.9 per cent. This is broadly in line with last week’s findings by Jones Lang LaSalle that values have slipped by 64.2 per cent since the peak of the market in September 2007.
The SCS/IPD Ireland Quarterly Property Index also reported that overall returns from the market showed a further fall of 2.3 per cent in the three months up to September.
The continuing decline in consumer spending took its toll on the retail market which saw the steepest falls in capital values last quarter, down 5.2 per cent. Difficulties faced in the occupier market were evidenced by rental values falling a further 4.4 per cent.
Across more specific locations, Grafton Street and unit shops outside Dublin were the hardest hit, with rental values down 5.9 per cent and 6.1 per cent respectively.
Shopping centres also suffered in the past three months with rental values down by 6.3 per cent, most of it resulting from an adjustment in yields.
It was not, however, all bad news as the office and industrial markets showed slight improvements on the previous quarter. Rental values in both cases declined by 3.3 per cent, the smallest quarterly reductions reported since December 2008.
Phil Tily, IPD managing director for the UK and Ireland, said the ongoing European zone crisis, coupled with the challenges in the local economy and the lack of clarity regarding the draft bill for the government’s rent review policy, has continued to unsettle the market which has seen values fall for the 15th consecutive quarter.
“Consumer confidence is clearly dropping away with austerity measures putting a squeeze on disposable incomes, resulting in retails recording their weakest performance figure (-3.2 per cent) for two years.
Hugh Markey of the Society of Chartered Surveyors said the market needed certainty and transparency. They were looking forward to the Government’s draft bill on rent reviews because, while there were elements that may be uncomfortable for landlords and tenants, at least it would bring a degree of closure to the issue.
