Overall returns from the Irish commercial property market have now been in positive territory for the past 13 quarters. The JLL Irish Property Index published today shows that returns for 2014 were 41.7 per cent higher than during the exceptionally low base in 2013.

The size of the year-end increase is also notable because it is the highest since the index was launched in 1973. The recovery in capital values was the main driver behind the impressive returns, rising by 31.4 per cent during the year. The retail sector had the most notable increase in values, growing by 34.3 per cent, followed by offices at 33.7 per cent. This was the first time since 2007 that retail values had exceeded those in the office market.

Hannah Dwyer, head of research at JLL, said that at this time last year no one predicted the strength and pace of the recovery which has been seen over the past 12 months. The turnaround for occupiers and investment markets has been remarkable and has positively affected the JLL index.

Dwyer said that although there had been significant increases in returns and values in the last 12 months, these had come from the bottom of the market and still remained below peak levels. Similarly rents had recovered off a low base. She said continued demand from investors and the further pick-up in occupier markets would drive competition in pricing for 2015. Rental recovery and reducing vacancy rates would underpin future capital growth, she said.

Increase in rents

Rental values were positive across all three sectors of the market for the second consecutive quarter. Overall, rents rose by 14.2 per cent in the last few months. The office sector showed the biggest annual increase (up 22.6 per cent) followed by retail (up 7.9 per cent) and industrial (up 3.1 per cent).

The index is based on the performances of 29 institutionally owned properties with an overall value of €374 million. The JLL index was compiled against an extremely busy investment background last year when commercial properties valued at €4.54 billion were sold. The turnover was 25 per cent higher than in 2013.

Dwyer said that while it did not expect activity this year to be at the same levels as 2014, investment volumes were still likely to reach €3 billion.