Report reveals good news for commercial property sector

A new report has today shown positive signs of commercial property market recovery in Q1 2010.

The Jones Lang LaSalle Irish Property Index showed some positive signs of commercial property market recovery in Q1 2010 with an overall return of 0.1% and a slowdown in capital value declines of -2.1%.

"In Q1 2010, overall returns for Irish commercial property recorded growth of 0.1%," said Dr Clare Eriksson, head of research.

"While this shows only a marginal positive movement it is a progressive change in trend and may be a tentative first indicator of a recovery of the market. Overall returns in the Index for the 12 months to March 2010 were -11.2%.

"The capital value of commercial property in Ireland fell by -2.1% in Q1 2010. While still negative, this is the lowest quarterly capital value decline in over two years since the end of 2007 and is much improved on some of the quarterly movements during the last few years such as -18.5% in Q3 08 and -15.9% in Q4 08.

"The performance of capital values steadily improved during each quarter of 2009, reducing from -10.6% in Q1 09 through to the lower negative movement of -4.0% in Q4 09. The pace of decline in the market is slowing and is moving steadily back to a period of positive growth."

The retail sector had the smallest drop in capital values falling by -0.6% in Q1 10 and by -16.9% in the year to March 2010, according to the report.

Industrial values fell by -1.6% in Q1 2010. Office property experienced the sharpest decline in quarterly performance during Q1 2010 of -3.5%.

The survey also reported that rental values for the entire index portfolio fell by -4.3% in Q1 2010.

Office rental levels were the hardest hit, falling by -26.7% in the year to March 2010 and by -7% in Q1 10.

Industrial rents dropped by -5.1% in Q1 10 and by -25.9% in the 12 months to the end of March 2010.

Retail rental values declined by -0.7% in Q1 2010 and by -16.7% in the year to March 2010.

Income levels in the Index had a yearly decrease of -2.2% in the year to March 2010 and a quarterly decrease of -1.7% in Q1 2010.

The overall income yield in the portfolio is now 8.4%, however, which has contributed to the positive overall performance.