Tax harmonisation threat to office market

TAX harmonisation could be the biggest threat to the Irish office market.

This view emerged as figures revealed the value of commercial property in Ireland fell by a record level in the first quarter of this year.

Commercial estate agents CB Richard Ellis said that although it is confident that any cyclical slowdown in the office sector will ultimately correct itself, the biggest threat to the long-term sustainability of this sector of the Irish property market is tax harmonisation, “with Ireland’s 12.5% corporation tax rate being the single biggest reason why international occupiers choose to locate here”.

It also said many licensed premises in Dublin are experiencing trading difficulties, which could lead some owners to consider offering their premises for sale over the coming months.

Director of research at CB Richard Ellis, Marie Hunt said: “Transactional activity will undoubtedly remain subdued until such time as there is an improvement in liquidity.

“However, the market is reasonably well insulated in that many proposed new schemes will now be put on hold in light of more uncertain conditions. This in turn will prevent oversupply and sustain rental values.”

She added that the commercial property market is notoriously cyclical and not immune to wider economic and financial market trends.

CB Richard Ellis anticipates there will be an increase in the number of development sites offered for sale over the coming months, as developers “strive to re-structure their debt”.

It said this will lead to some interesting buying opportunities for those willing to invest.

It also said that it is “inevitable” that some hotel projects will be put on hold and transactional activity will probably remain fairly subdued.

In a separate report, released by British-based Investment Property Databank, the value of retail, office and industrial properties in Ireland declined by 3.3% in the first quarter of this year — which is its first decline in five years and its largest ever drop.