Activity in the commercial property sector reached exceptionally high levels in the summer and is expected to escalate as vendors scramble to take advantage of the soon-to-expire capital gains tax waiver, introduced as part of Budget 2012.
Commercial property consultants CBRE yesterday released its latest bi-monthly analysis of the market, showing high transaction levels continued unabated in July and August.
“Deal flow in the Irish commercial property market has been phenomenal over recent months, with activity even continuing at pace during the summer months, when the market is typically quiet. Indeed, there has never been a busier July and August in the Irish investment market or the hotels and licensed sector of the market than experienced in 2014, with transactions being completed right throughout the summer and several portfolios and assets launched for sale in this period,” said CBRE executive director and head of research, Marie Hunt.
The property consultants expect the volume of development land coming on stream to increase ahead of the expected phasing out of the capital gains tax waiver in the forthcoming budget.
Funding for development is readily available from private-equity providers and increasingly from financial institutions, according to CBRE, but policy changes are required to increase supply, they claim.
Development levies, contributions, restrictive planning permissions, the 80% windfall tax and new building regulations are impacting severely on house-building, the report claims.
Total return on commercial property of 8.5% in the second quarter of the year was the highest quarterly return since 2006, while Dublin saw the seventh highest volume of investment activity in the Europe, Middle East and Asia region in the first six months, also the first time since 2006 that it featured in the top 10. The increasing scarcity of prime Dublin office buildings has continued to drive rental values higher, with a 15% increase recorded in the opening half of the year.
A separate report from property firm HWBC supported this view, resulting in the company tripling its initial full-year growth expectation, from 10% to 30%. It predicts tenants will look to the fringes of the city and suburban locations to find affordable office space.
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