Commercial property sees upturn

The commercial property sector saw a marked upturn during the first half of the year, with transaction volumes rising considerably and values stabilising.

According to latest data from the Irish division of international commercial property consultancy, CB Richard Ellis (CBRE), 12 property investment transactions over the value of €1m were signed between January and the end of June — with a combined value of €140m. While there was no real change in total first-half value this year — although the first half of last year was heavily skewed by Google paying Nama just under €100m for Dublin’s Montevetro building — the volume of transactions rose significantly, with only three commercial transactions over the value of €1m carried out in the first six months of 2011.

Values, however, are still well below the highs seen five and six years ago when combined full-year values were hitting between €2bn and €3bn on average.

Nevertheless, CBRE expects the upward trends to continue, saying there is the potential for the second half of this year to feature another 12 deals being signed, at least.

While the data covers the whole country, most of the deals are understood to have been undertaken in Dublin. Three quarters of the investment was carried out by overseas buyers.

In its latest market review, CBRE said: “Irish commercial property values have declined for more than five years, but now appear to be reaching a floor, with prime properties stabilising. Total returns have been positive for three consecutive quarters now.”

It added that prime office and retail yields in Dublin have improved slightly since the beginning of the year as a result of strong investor demand and bid levels pertaining on prime assets.

CBRE also welcomed news that IDA Ireland — which recently warned of the prospect of a lack of available modern office space, particularly in Dublin, hampering overseas investment growth — has held talks with Nama over the latter freeing up some of the office space it now controls.

However, away from companies that are looking to inhabit offices, investors looking to buy, before renting or selling, are beginning to relax their own criteria due to a scarcity of prime product being offered for sale in Dublin.

Most domestic commercial property buyers are focusing on sites outside the capital.

According to Domhnaill O’Sullivan, the director of investments at property giant Savills Ireland, a combination of factors — from Ireland’s success in attracting foreign investment, to attractive yields and banks disposing of more properties — is helping Dublin outrank many European cities when it comes to attracting commercial property investment.