Investment in commercial property plunges 89%

INVESTMENT in commercial property in Ireland has plunged 89% from €392 million to almost €42m in the first half of the year.

Property firm, CB Richard Ellis, which compiled the figures, said that the first six months of this year represented an unprecedented period in the Irish property investment market as a lack of bank funding and plunging values had a severe impact on investment activity.

It said that while property values in the Irish market have fallen considerably in the last 12 months, transactional activity has effectively dried up because of a lack of bank funding to enable potential investors to purchase at the new discounted pricing levels.

Although the first half of the year was a difficult one, CB Richard Ellis said it is beginning to see some engagement between buyers and sellers in the Irish investment market but added that the overall investment spend in 2009 will pale in significance to the level of investment in the market in recent years.

“It must be pointed out that there has been an improvement in transactional activity in the last three months, a trend which we expect will continue in Q3,” it said.

The property company expects to see a small number of transactions concluded in the second half of the year especially from international investors.

It said, however, that government proposals to ban upward only rent reviews will have “huge implications” for the Irish investment market.

“This proposed legislative change will essentially create a two-tier market, impact negatively on values and funding and put Ireland at a distinct disadvantage relative to the British property investment market, while doing nothing to assist the occupiers who are currently struggling to meet rental payments,” it said.

The report also showed Irish investors spent €741m in Britain in the first six months of this year.

Despite the high figure it notes that this was skewed by one very large transaction, with a lack of funding to support investment

coupled with fears about weakening prospects in the occupier markets leading to a very significant decline in the volume of investment activity generally.

It expects investor activity to pick up pace in Britain in the second half of this year.

“It is the most liquid market in Europe and will the first to show signs of a recovery. Ironically, if the Irish Government introduce proposed legislation banning upward only rent reviews in Ireland, the UK market will be considerably more attractive,” it said.