Dublin offices among most ‘over-valued’ in Europe

By Eamon Quinn

Dublin office valuations are among the most over-valued in Europe, according to an analysis by Capital Economics in London.

Its analysis places Dublin as the second most overvalued against measures which compare yields over the past 10 years and with government bond yields, and the third most overvalued compared with equity yields.

“Pulling these scores together, Athens is now the only undervalued office market and 17 out of 31 European office markets are over-valued, with Oslo and Dublin looking particularly expensive. The office sector has now joined the industrial sector in looking overvalued as a whole for the first time,” according to the assessment.

It says that assessing property valuations “is not an easy task” but believes using comparisons of government bonds, corporate bonds and equities “is a useful approach” to end up with valuation scores across the region.

“Our valuation measure focuses on the income yield of property and alternative asset class yields. Other property valuation measures tend to factor in expectations for rental growth.

“However, in our view, this risks falsely justifying aggressive market pricing, particularly near the peak of a cycle.

Therefore, we base our analysis on the current income yield, which we believe provides a fair and prudent comparison against the other asset classes,” says Capital Economics.

On its overall retail scorecard, it finds Dublin is the fourth most over-valued market in Europe and the city’s industrial commercial space the second most overvalued. Across Europe, Capital Economics finds retail is the best-placed of the three property areas, while industrial property looks the most over-valued market.

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