Retail property value up by 18%

THE value of commercial retail property has appreciated by 18% in the year to the end of June, according to Jones Lang LaSalle Irish Property Index.

Driven by strong demand from national and international retailers, the capital values and rental growth in the retail sector made up for poorer performances in the other areas of offices and industrial property.

“The office and industrial warehousing sectors are expected to deliver predominantly income performance in 2004,” according to Dr Clare Eriksson, head of research at Jones Lang LaSalle in Dublin.

“Although market conditions are improving, there is still no sign of a resumption of rental growth on which to base a rise in capital values.”

The overall index showed a quarterly return of 1.8% in the second quarter of 2004 and annual growth of 9.5% in the year to the end of June. Capital values for the second quarter of the year rose 0.4% overall, and 5.6% in the year to Q2 2004.

Capital values in the retail sector proved the most robust in the last quarter, rising by 1.4%, and by 18.1% in the year to date. Industrial capital values grew marginally in Q2 2004 with a 0.8% increase and an annual rise of 2.7%. The office sector for Q2 2004 had a negative return of 0.3% in terms of capital values, and 1.0% in the year.

Rental values across the entire portfolio dropped by 0.2% in the quarter and by 1.1% in the year to June 2004. The retail sector continues to be the strongest performer, with a quarterly rental value rise of 1.7% and an annual increase of 10.1%. Rental values for the industrial sector diminished by 0.1% in Q2 2004 but had a marginal annual increase of 0.8%. In Q2 2004 office rental values continued to perform negatively with a 1.1% return in the quarter and a 5.9% return in the year to June 2004.

Income growth in the portfolio for the year to June 2004 was +7.2% and +0.2% in the quarter. Current income yields on property now average 4.5%.