Commercial property market 'will bottom out in mid-2009'
'The risk of oversupply has been muted by a number of office developments being put on hold'
Irish commercial property prices may fall a further 21pc but as much as 10pc of this fall may be due to falling rents. Furthermore, the market may bottom out by the second or third quarter of 2009.
This is the view of Goodbody stockbroking analyst Eamonn Hughes, who noted that the IPD/SCS property index has recorded a 24pc fall in values from their peak.
"While we anticipate further declines in property prices, it is helpful to see that the Q3 (IPD) pricing adjustment takes us over the halfway mark, which presumably makes one hopeful of moving closer to the floor by Q2/Q3 next year," he said.
However, CBRE director Marie Hunt believes that Mr Hughes is being over bearish.
"In previous downturns in the Irish market, values typically fall by 30-35pc peak to trough," she said.
Factoring in a 45pc decline is very bearish on the basis that most of the yield adjustment in this cycle has already been factored in."
On the other hand, Ms Hunt's colleague Patrick Koucheravy points out that as property prices fall and the cost of money becomes cheaper, "property may soon become a self-financing asset class".
Mr Koucheravy concurs with Mr Hughes on the outlook for prices but disagrees on rents.
"With regards to rental values, we've seen only a marginal decline in office rents," he said. "They have been marginal because the risk of oversupply has been muted by a number of office developments being put on hold and also by an intensification of competition for city centre office space. Although Dublin vacancy has gone up overall, in the city centre the vacancy rate has fallen to nine per cent. Over 80pc of outstanding requirements for office accommodation are located in the city centre districts."
- Donal Buckley Commercial Property Editor
