Warning on rent review proposals

THE ongoing issue of rental pressure on retailers needs to be resolved between landlords, their tenants and their banks rather than government, according to the Irish division of international commercial property consultants, CB Richard Ellis.

CBRE said yesterday that there exists “huge concern” in the retail market concerning the proposals by the incoming Government regarding retrospectively reviewing rental agreements.

“While we acknowledge that many retailers are currently struggling to meet existing rental commitments, they say that instead of implementing a broad brush approach that will ultimately impact negatively on taxpayers, pensioners and indeed NAMA, the best way for the rent issue to be resolved is if landlords, tenants, banks and other stakeholders work together to come up with sensible solutions,” the company said in its first bi-monthly sector report of this year.

“The uncertainty that the Government proposal on rent reviews is creating has weakened overseas appetite for Irish real estate assets and, if introduced, will force values in the Irish commercial property market to fall further,” it warned.

Director of research, Marie Hunt, added: “Prime rents, in all sectors, are now down 50% from peak levels and appear to be stabilising. However, the gulf between prime and secondary assets continues to increase, with very limited appetite for secondary properties — a trend that is evident in most markets across Europe.

“While there are encouraging signs of activity in the occupier markets of the Irish market, the investment sector remains in a very precarious position with overseas investors unlikely to commit to any large-scale purchases of Irish real estate until such time as there is clarity on the new Government’s intentions with regard to rent review mechanisms.”

The update showed letting activity has continued in the office sector, with 1.2 million square feet of lettings likely to be achieved in Dublin this year, following on from a strong 2010.